Oil prices decline after OPEC Plus agreed to increase production

Mohammed Abdelkhalik
July 20, 2021
Oil prices

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Oil Prices Outlook – 20th July 2021

Global oil prices fell during the trading session today in AvaTrade, to continue their losses for the fifth consecutive session, with US crude trading below $70 a barrel, and Brent crude below $71 a barrel.

This decline came after the “OPEC Plus” alliance officially agreed to increase production. Beginning next August, which renewed concerns about oversupply in the markets, especially after the acceleration of production in the United States, “the largest oil producer in the world.”

Oil prices movement

OILUSD daily chart - 20th July 2021

At exactly 08:45 GMT, West Texas Intermediate (US) crude for August delivery fell by about 0.23%, to trade around the level of 66.37 US dollars per barrel, from the opening level of today’s session at 66.60 dollars, and reached the highest price at 66.63 dollars per barrel.

As for the international crude futures contracts, “Brent crude” for September delivery, it also declined by 0.26% to trade at the level of $68.81 a barrel, compared to the opening level at $68.99, and it reached the highest price at $69.18 a barrel early in the session.

At the conclusion of trading on Monday, US crude lost 2%, and the benchmark Brent crude also fell 2.2%, in the fourth consecutive daily loss, to record the two crudes at their lowest level in about a month and a half.

OPEC + agreement

On Sunday, we followed the activities of the emergency meeting of the Joint Ministerial Monitoring Committee of the Petroleum Exporting Countries, OPEC and its allies from independent producers, led by Russia, the group known as “OPEC Plus”, which resulted in an agreement under which the alliance will increase its oil production by about 400,000 barrels per month, starting next August. With the extension of the expiry date of the cuts until the end of 2022 instead of April 2022.

Under this agreement, the United Arab Emirates and many other countries were given higher baselines on which to measure production cuts, as OPEC + decided to raise the minimum production from 43.8 million barrels per day to 45.5 million barrels per day, which will be implemented starting from May 2022

On the other hand, US production of crude oil rose by about 300,000 barrels per day over the past two weeks to 11.4 million barrels per day until the week ending on the ninth of this month.

Demand concerns

Global oil prices are currently under many pressures, due to the growing fears again about the pace of recovery in global demand levels for fuel, as the outbreak of the new highly contagious “delta” strain of the Coronavirus led to the imposition of new restrictions and procedures on movement around the world, especially in the Asian continent. “The largest oil-consuming continent in the world,” with major governments tightening restrictions on closures and sanitary isolation.

According to the latest figures issued by the World Health Organization, the number of people infected with the coronavirus has increased to nearly 190.60 million people, and the number of deaths has reached 4,093,145 people, while the number of vaccine doses given, according to the latest update yesterday, reached 3.437 million doses.

Author Mohammed Abdelkhalik

Professional Trader and Analyst, economist in Financial and Forex market since 2004.holds an MBA from the American University in Egypt. Mohammed works as an economic writer and technical & fundamental analyst for many international Forex and financial trading companies in both English and Arabic on a daily basis.