WASHINGTON (DTN) -- Nearest-delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange charged higher in afternoon trade Wednesday. A sizable draw in U.S. commercial crude oil supplies and the expected decision from the Organization of the Petroleum Exporting Countries and partners to increase production further reinforced the market's view on recovering demand as the global economy bounces back from the coronavirus pandemic.
NYMEX West Texas Intermediate August futures surged $0.91 on the session to settle above $41 per barrel (bbl) for the first time since early March, settling the session at $41.20 per bbl. Meanwhile, the international benchmark Brent crude for September delivery advanced $0.89 to finish at $43.79 per bbl. NYMEX ULSD August futures rallied 2.40 cents to $1.2448 gallon, and the front-month RBOB contract gained 1.71 cents to a $1.2645-per-gallon settlement.
OPEC+ producers announced Wednesday they will taper supply curbs by 2 million barrels per day (bpd) beginning on Aug. 1, bringing cumulative reductions to 7.7 million bpd as the coalition moves to the next stage of their agreement.
"As we move forward the extra supply resulting from the scheduled easing of production will be consumed as demand continues on its recovery path," said Saudi Energy Minister Prince Abdulaziz bin Salman on Wednesday.
According to the original agreement from April 12, OPEC+ was to cut 9.7 million bpd for May and June before easing these curbs to 7.7 million bpd through the end of December.
From January 2021, the production cuts are scheduled to be further lifted to 5.8 million bpd, to remain in effect until the end of April 2022.
Reuters reported on Wednesday, citing obtained documents of an agreement, the actual production cuts in August and September would be at least 8.54 million bpd as laggard members Iraq and Nigeria continue to cut deeper to compensate for previous lack of compliance.
Russian Energy Minister Alexander Novak said a partial restoration of production would benefit the market and that Russia would raise oil output by around 400,000 bpd from August.
A day before the meeting, OPEC released its closely watched monthly Oil Market Report where the group forecast global oil demand to increase by 7 million bpd next year after plunging 8.9 million bpd in 2020. The cartel forecasts demand for its crude to jump by 6 million bpd next year, accounting for almost all growth in oil consumption that year, while non-OPEC supply is seen increasing by less than 1 million bpd in 2021.
Further bolstering the oil complex, Energy Informational Administration data released Wednesday show total U.S. commercial petroleum inventories dropped 9.3 million bbl in the week ended July 10, with an 8.322 million bbl drop occurring in crude-oil stockpiles alone. The supersized drawdown was realized as crude imports plunged 1.827 million bpd from the previous week, while exports held higher on week to 2.543 million bpd.
Gasoline stockpiles declined by 3.1 million barrels to a 15-week low at 248.5 million bbl, while analysts forecast them to fall by 900,000 barrels. Demand for motor fuels slipped 118,000 bpd from the previous week to 8.648 million bpd, with traffic data indicating mobility has slowed across Southwestern states.
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