Oil falls on OPEC+ concerns over slow demand recovery

Oil prices fell on Wednesday on concerns about the market’s recovery after the Organisation of the Petroleum Exporting Countries (OPEC) and its allies lowered the 2021 demand growth forecast, although strong Chinese factory activities lent some support.

Brent crude for May, which expires on Wednesday, fell $0.32, or 0.5%, to $63.82 a barrel at 0948 GMT. The more active Brent contract for June was down $0.3, or 0.5%, at $63.87 a barrel.

US West Texas Intermediate (WTI) crude futures fell $0.28, or 0.5%, to $60.27 a barrel.

OPEC+ has lowered its oil demand growth forecast for this year by 300,000 barrels per day (bpd), a report from its experts panel meeting seen by Reuters showed.

OPEC and allies, together called OPEC+, are set to meet on Thursday to decide on output policy.

“Given this pessimistic outlook, it seems likely that the production quotas will be left in place for another month,” said Commerzbank analyst Eugen Weinberg.

OPEC+ is currently curbing output by just over 7 million bpd in a bid to support prices and reduce oversupply. Saudi Arabia has added to those cuts with an additional 1 million bpd.

“The oil market is still playing a guessing game as to what supply policy OPEC+ will set out at tomorrow’s (Thursday’s) meeting, but the $64-per-barrel Brent price signals that traders expect a cautious approach from the alliance,” said Rystad Energy analyst Louise Dickson.

Kuwait Oil Minister Mohammad Abdulatif al-Fares expressed “cautious optimism” on Wednesday that the global oil demand will improve as Covid-19 vaccination programmes gather pace and industrial output recovers.

Oil prices found some support as China’s manufacturing activity expanded at the quickest pace in three months in March as factories cranked up production after a brief lull during the Lunar New Year holidays.