Oil prices moved in the narrowest range ever this past week.
Brent crude oil fell by only 10 cents from the week earlier to close at $43.14 per barrel while WTI moved higher by only 4 cents to $40.59 per barrel.
These prices are extremely close to July average for both benchmarks so far.
Historically large output cuts by OPEC+ of nearly 2 million barrels per day through the end of the year are already well priced into the market.
OPEC’s 13 members pumped 22.27 million bpd in June. The 23 OPEC+ producers have successfully achieved 107 percent compliance with their committed cuts, according to OPEC data seen by S&P Global Platts. Non-compliant producers have also committed to make up for their shortfalls in August and September, making the headline cuts larger.
The huge consensus within OPEC+ demonstrates a powerful sense of unity that is capable of bringing the market into balance and adjusting output as needed.
Rising coronavirus cases worldwide continued to cloud the short-term outlook as infection numbers climbed again in some major economies that had eased restrictions.
Still, the market remains well supported by inventory data released by the US Energy Information Administration (EIA), which showed a large drawdown of 7.5 million barrels.
One potential challenge to the compliance and cohesion of OPEC+ may be the reluctance of some refiners to increase their refining capacities as the recovery in fuel demand remains fragile.
While Chinese refiners throughput surged to the highest on record in June, Asian refiners may be cautious about boosting crude imports as the demand outlook remains foggy.
• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq