As of 16:25 London time, August Brent crude fell by 0.88% to $76.27 a barrel. By that time, July West Texas Intermediate crude was down 0.89% to $71.89.
Commercial crude inventories in the US decreased by 500,000 barrels through the week ended Friday to 459.2 million barrels, according to the Energy Information Administration. This figure disappointed analysts who had expected an increase in reserves, at least by 1 million barrels. In addition, oil production in the United States increased by 200,000 barrels a day, reaching 12.4 million barrels a day.
Let's also recall the situation regarding OPEC+ production. Following its latest meeting on June 4, the cartel announced the extension of its deal until 2024. Specifically, OPEC decided to maintain all agreements on mandatory oil production cuts until the end of this year, in addition to concluding additional agreements on voluntary cuts with certain countries. Saudi Arabia, for example, plans to unilaterally reduce its oil production by another 1 million barrels per day next month.
To be honest, the more voluntary cuts are added to the previously agreed quotas, the more confusing it all becomes. From next year, the overall target level of oil production seems to be decreasing by 1.4 million barrels a day. It is not difficult to assume that a real energy resource deficit is being formed in the global market as a result.
Nevertheless, some OPEC+ countries are undoubtedly deceiving in some way. For example, they clearly do not produce as much raw material as they should according to the quotas. Why? Simply because they lack the necessary capacity. Or, for example, other OPEC countries that promised to voluntarily reduce production are not actually reducing anything.
Let's take Nigeria, Angola, Algeria, and Iraq—they are likely producing less than their quotas allow. However, Russia clearly produces more than it is supposed to, despite agreeing to reduce oil production by 500,000 barrels in April.
There is obvious confusion and uncertainty, which is why the signals from OPEC are not received as strongly by the market participants as they could be. For instance, after the alliance announced its plans to cut production in October 2022, the prices of benchmark Brent crude oil jumped to $93 per barrel. Similarly, in April, OPEC unexpectedly announced voluntary production cuts, leading to a 7% increase in oil prices. This week, OPEC announced a reduction in production volumes again, but oil prices only rose by 1.9%, and by Thursday, these gains were lost.
It is evident that the market no longer trusts all these statements from OPEC countries. Instead, they pay more attention to export data and other production indicators, in other words, everything that can provide a more accurate picture of the volumes of oil entering the global market.
By the way, things are much more complicated with Russia, as it has recently stopped publishing data on its production and exports.
