Oil declined after OPEC+ stuck with a plan to boost crude production, with the cartel wagering that the global market can absorb the additional supply as demand improves and stockpiles get drawn down.
West Texas Intermediate was 0.6% lower in early Asian trading after closing little changed on Wednesday. After a swift midweek meeting, ministers from the Organization of Petroleum Exporting Countries and allies including Russia ratified the 400,000 barrel-a-day increase scheduled for October.
Crude has rallied about 40% this year as consumption bounced back from the impact of the coronavirus pandemic, although the bulk of the gains came in the first half. Against that backdrop, OPEC+ has been gradually restoring more of the supply it suspended last year when the global health crisis erupted.
“While the effects of the Covid-19 pandemic continue to cast some uncertainty, market fundamentals have strengthened and OECD stocks continue to fall as the recovery accelerates,” OPEC+ said in a statement, referring to the Organization for Economic Cooperation and Development. The group next meets on Oct. 4.
Further evidence of a tightening market came on Wednesday as a U.S. government report showed nationwide crude stockpiles sank 7.2 million barrels last week to the lowest in almost two years. In addition, total oil products supplied, a proxy for demand, rose to its highest in data going back to 1990.