On Wednesday, the oil price stabilized after a sudden decline in the previous session. It was supported by an extension of the agreement between OPEC and its allies to cut production, in spite of a fear that demand will be dropped due to a global economic slowdown. The oil prices got support from data pointing a bigger than expected downfall in the U.S crude inventories. Brent crude for September delivery increased 12 cents to $62.52/ barrel or 0.2%. The U.S crude for August delivery increased 16 cents or 0.3%, to $56.41/ barrel. On Tuesday, the crude oil price declined more than 4% following an expected global economic slowdown.
The independent oil producers and OPEC, including Russia, agreed to extend an oil production cut-off agreement until March 2020. The OPEC members moved beyond their differences to support prices. On Wednesday, the U.S Petroleum Institute announced before the release of government data that crude inventories in the United States declined by 5-million barrels during last week. The expectations were for a decline of 3-million barrels. Citi analysts said the extension of a 9-month oil production cut would drain oil stocks during the 2nd half of the current year.
It is noteworthy that oil prices fell at least 4% on Tuesday after OPEC and its allies agreed to extend production cuts until March. Brent crude futures were down $2.66, or 4.1%, at $62.40/ barrel. On Monday, the West Texas crude futures declined $2.84, or 4.8% at $56.25/ barrel after hitting their highest level in more than 5-weeks. The OPEC and some others outside the organization, such as Russia agreed to extend oil production cuts until March 2020. Point to be noted that members of the Organization crossed their differences in an effort to support crude prices. The extension took place after Russian President Vladimir Putin said he agreed with Saudi Arabia to extend the deal to continue cut output by 1.2 million barrels/ day.