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UPDATE 1-Oil drops after OPEC+ reaffirms supply return as demand wavers

reuters.com · 09/02/2021 00:33
UPDATE 1-Oil drops after OPEC+ reaffirms supply return as demand wavers

Adds comment, charts, updates prices

By Aaron Sheldrick

- Oil prices fell on Thursday after OPEC+ agreed to keep its policy of gradually returning supply to the market at a time when coronavirus cases around the world are surging and many U.S. refiners, a key source of crude demand, remained offline.

Brent crude LCOc1 was down by 16 cents, or 0.2%, at $71.43 a barrel by 0422 GMT, after dropping 4 cents on Wednesday. U.S. oil CLc1 fell 23 cents, or 0.3%, to $68.36 a barrel, after rising 9 cents in the previous session.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, together known as OPEC+, agreed on Wednesday to continue a policy of phasing out record production reductions by adding 400,000 barrels per day (bpd) each month to the market. nL1N2Q30F8

However, OPEC+ raised its demand forecast for 2022 while also facing pressure to accelerate production increases from the Biden administration, which said it was "glad" the group had reaffirmed its commitment to raising supply. nL1N2Q30F8 nW1N2PA04Y

"What is not so certain ... is whether demand will be able to grow as quickly as OPEC+ and the market predicts, given the risk of new lockdowns to fight the unresolved Covid-mutant spread," Rystad Energy's head of oil markets, Bjornar Tonhaugen, said in a note.

In the U.S., oil refineries in Louisiana may take weeks to restart after Hurricane Ida swept through the region, with operators facing power and water shortages, which is likely to crimp demand for oil. nL1N2Q32LU

Energy companies were scrambling to restart platforms and pipelines in the Gulf, with about 1.4 million bpd of oil production still offline, the U.S. offshore regulator said. nL1N2Q30XA nL4N2Q21PL

U.S. crude inventories dropped by 7.2 million barrels and petroleum products supplied by refiners rose to a record despite the increase in coronavirus infections across the country, the Energy Information Administration said on Wednesday. EIA/S

"Stocks seem likely to rise in the weeks ahead as reports suggest that refinery activity will take longer to restart than crude production in the aftermath of Hurricane Ida," said Kieran Clancy, commodities economist at Capital Economics.

CHART: U.S. oil may retest support at $67.37nL1N2Q405H

CHART: Brent oil may retest support at $70.22nL1N2Q401W

(Reporting by Aaron Sheldrick; Editing by Leslie Adler & Shri Navaratnam)

((aaron.sheldrick@thomsonreuters.com; 81-80-2677-4134;))