Oil steady after Saudi minister signals OPEC+ may reduce cuts

SEOUL/LONDON: Oil prices steadied on Wednesday, supported by a sharp drop in US inventories, but further gains were held in check as the Saudi oil minister said OPEC and allies may ease supply curbs from August as the global economy slowly recovers from the coronavirus pandemic.

Brent crude was up 14 cents, or 0.3%, at $43.04 a barrel at 1325 GMT, and US West Texas Intermediate (WTI) crude rose 13 cents, or 0.3%, to $40.42 a barrel.

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, have been cutting output since May by 9.7 million barrels per day (bpd), or 10% of global supply, after the virus destroyed a third of global demand.

After July, the record cuts are due to taper to 7.7 million bpd until December.

Saudi Arabia's energy minister Prince Abdulaziz bin Salman said OPEC+ was moving to the next phase of its oil cut pact when the group is expected to ease their reductions as oil demand recovers.

"OPEC+ managed to orchestrate the greatest balancing act ever seen in oil market history. But now, the alliance is ready to start concluding the show," said Rystad Energy's senior oil markets analyst Paola Rodriguez-Masiu.

The oil prices found some support from the fall in US crude inventories.

US stocks fell by 8.3 million barrels in the week to July 10, beating analysts' expectations for a decline of 2.1 million barrels, according to data from industry group the American Petroleum Institute.

Official numbers from the US Department of Energy are due later on Wednesday.

On Tuesday, OPEC said it saw demand recovering by 7 million bpd in 2021 after falling by 9 million this year.

Oil prices have recovered to almost $43 a barrel from a 21-year low below $16 in April. The recovery in prices has allowed some US producers to resume suspended production, a move that is set to weigh on OPEC's decision on Wednesday.

Prices were also supported by promising early data for a potential COVID-19 vaccine, but the resurgence of the coronavirus in the United States and other countries still kept traders on edge.

"Although the demand for crude has jumped in recent weeks, rising coronavirus cases in the United States along with some cities in other major economies reimposing shutdowns have the potential to hit demand," Lukman Otunuga, Senior Research Analyst at FXTM.