Oil continues to fall for second straight day

Oil prices continued to drop as the US market opened on Thursday, deepening losses for the second day in a row, on profit-taking from 3-month highs, and growing doubts that OPEC-Plus coalition will extend its output agreement, but these losses are being curbed after the an unexpected drop in US crude inventories, and US production falling to the lowest level since 2018.

The US crude fell 0.9% to $36.40 a barrel, after it opened at $36.73, and hit an intraday high of $37.06, and Brent crude fell 1.3% to $39.06 a barrel, after it opened at $39.58, and hit a high of $39.72.

The US crude lost 0.3% yesterday, posting the first daily loss in 5 days, on profit-taking from a 3-month high of  $38.15 a barrel.

Brent July futures fell 0.25% yesterday, after hitting the highest since March 6 at $40.51.

Reuters reported citing sources that Saudi Arabia and Russia has agreed in principle to extend the production cuts for one month until the end of July, after most of the OPEC Plus coalition member agreed too.

According to the sources, the OPEC-Plus coalition probably will not hold the anticipated online video conference meeting today, as the meeting is now conditioned to the approval of the member states that didn't commit to their shares from the current output cut.

Should the collation not agree on extending the cut, the global production cut by 9.7 million barrels per day will continue until June, but the cut will be reduced to 7.7 million bpd from July until the end of 2020. 

Similarly, Saudi Arabia, Kuwait and the UAE, will not extend their voluntary extra production cuts of 1.18 million barrels after June, regardless of the OPEC Plus decision.

The US Energy Information Administration (EIA) showed yesterday  that the US crude inventories fell by 2.1 million barrels, lower than forecasts of a rise by 3 million, which is the second weekly drop in 3 weeks, a sign of improving domestic demand after relaxing the coronavirus lockdown measures.

As for the production it fell 200,000 barrels to 11.3 million barrels per day, the lowest level since the week ending October 19, 2018.

Additionally, the US production fell by about 1.9 million barrels per day or 15% since mid-March, after the suspension of the US production activity due to the gap between the cost of extraction and the falling prices.