2020.07.1519:27:00UTC+00Crude Oil Futures Settle Sharply Higher On Inventory Data, OPEC Move

Crude oil futures ended notably higher on Wednesday, after official data showed a marked decline in U.S. crude inventories in the week ended July 10, and on OPEC+ Joint Ministerial Monitoring Committee's move to taper production cuts from August.

Positive news on the coronavirus vaccine front too contributed to oil's rise as the report helped reduce fears of another large scale lockdown.

Oil was also supported by OPEC's report that said demand for oil may recover by 7 million barrels per day in 2021 after falling by about 9 million barrels per day this year.

West Texas Intermediate crude oil futures for August ended up $0.91 or about 2.3% at $41.20 a barrel, the highest settlement since March 6.

Brent Crude futures moved up $0.75 or about 1.75% to $43.65 a barrel.

Data released by Energy Information Administration (EIA) this morning showed U.S. crude inventories dropped by 7.5 million barrels last week, nearly four time the expected drop of about 2.1 million barrels.

On Tuesday, the American Petroleum Institute said U.S. crude inventories dropped by 8.3 million barrels in the week ending July 10.

The Organization of the Petroleum Exporting Countries and their allies will taper oil production cuts starting in August, effectively raising output . The OPEC+ will allow record production cuts of 9.7 million barrels per day to decrease to 7.7 million barrels per day starting August, in line with a previous OPEC+ agreement to gradually taper the reductions.

However, those countries which did not meet their quota limits in May and June are expected to reduce production even more starting in August to compensate for their overproduction.

At a press conference, following a meeting of the group's on Wednesday, Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman said actual cuts, including the reductions from countries compensating for that overproduction, will be at roughly 8.1 million to 8.2 million barrels per day, pending data from June.

The minister said the 8.1 million-barrel per day reduction is probably the floor, with the ceiling for the cuts at roughly 8.34 million barrels.