Crude oil futures steady on OPEC+ planned compensation cuts

Singapore — 0237 GMT: Crude oil futures were stable in mid-morning trade in Asia on Aug. 21 as planned compensation cuts by the OPEC+ coalition offset a bearish US jobs report amid worries of a slowing economic recovery.

At 10:37 am Singapore time (0237 GMT), the ICE Brent October crude futures were up 16 cents/b (0.36%) from the Aug. 20 settle at $45.07/b, while the new front-month NYMEX October light sweet crude contract was up by 9 cents/b (0.21%) at $42.91/b.

The global crude complex was rangebound this week as a drawdown in US commercial crude and gasoline inventories was offset by a decline in total products supplied, US Energy Information Administration data released Aug. 19 showed.

Meanwhile, the headline OPEC+ Joint Ministerial Monitoring Committee meeting Aug. 19 proved to be supportive for prices as the coalition continued to put a strong focus on compliance and compensation cuts.

OPEC+ members that had exceeded their production quotas in May, June and July will have to cut a combined extra 2.31 million b/d as compensation by the end of September, S&P Global Platts reported earlier. Notably, Iraq and Nigeria were the two biggest laggards, overproducing by 851,000 b/d over the three months, while Nigeria was over its limit by 315,000 b/d.

"Industry reports estimate that approximately 1.2 million b/d of additional cuts through August and September are needed to offset oversupply to date, implying OPEC+ cuts fall to 8.9 million b/d in the current phase instead of the 7.7 million b/d target," Stephen Innes, chief global markets strategist at AxiCorp, said in a Aug. 21 note.

These factors combined allowed Brent crude futures to continue to trade in a tight range around the $45/b level, while NYMEX WTI stayed slightly below $43/b.

However, the continued spread of COVID-19 worldwide continues to weigh heavily on economic recovery, reviving concerns of energy demand.

US initial jobless claims for the week ended Aug. 15 was reported at 1.11 million, higher than analysts' expectations of a 925,000 gain and the 971,000 figure reported in the previous week, US Labor Department data released on Aug. 20 showed.

Global COVID-19 case counts stood at 22,539,975, while total daily infections worldwide shot back up to 273,374 cases, slightly lower than the record of 304,449 cases set on Aug. 14, latest data from John Hopkins University showed.

"On the health front, there is no question that traders are still peering into a cloudy viewfinder as even with new COVID-19 cases declining across the US, we know that can change on a dime as evidenced by recent second wave breakouts around the world. And it is going to take some time for people to feel safe to move freely and possibly only when a vaccine is in hand," Innes added.