Oil prices surged some 10 percent last week, largely due to the devastation of Hurricane Delta which slammed into the Gulf of Mexico and caused disruptions in production in the region. Following the moves, analysts had started to consider the possibility of a breakout for oil prices, but Monday's reversal has called this forecast into question.
Saudi Aramco has announced that intends to increase production in the coming years as it expects demand to increase once the threat of COVID-19 passes and people begin to travel again. The company has announced that it plans to add 1 million barrels per day to its production, eventually reaching 13 million barrels per day, as compared to its current level of 12 million barrels per day.
Similarly, OPEC+, largely responsible for supporting oil prices with its strategic production cuts, is rumored to be mulling the possibility of reducing its production cuts and bringing back more oil to the market starting in Q1 2021. According to the reports, OPEC+ plans to curb production cuts from its current cuts of 7.7 million barrels per day to cuts of some 5.8 million barrels per day in the next quarter.
U.S. WTI prices were down 1.21 percent as of 8:53 a.m. GMT, to trade at $40.11 per barrel. Brent crude futures were down 1.14 percent to $42.36 per barrel.
The latest reports from the Energy Information Administration showed a decline in US crude inventory for ten of the past eleven weeks. Still, US stocks of 492.2 million barrels place inventories about 12 percent higher than the five-year average for this time of year, a number which, though distressing, is still below the numbers in July and April (when storage was at near capacity).