Oil prices recorded gains in yesterday’s late session, which they are largely keeping intact this morning, as traders await for news from August’s most interesting event, tomorrow’s OPEC+ meeting.

The current levels have priced in news that the alliance’s member compliance has been quite high in July, a key clue for calculating balances, as we are entering a period of production surpluses.

Traders are also keeping their horses on anticipation of news from the US, where the API institute is announcing its weekly stock change estimates today.

Aside from the API stats and the coming OPEC+ meeting, markets are receiving marginally bearish news this morning from the demand side, as South Korea’s is considering reinstating stricter measures against the resilient coronavirus outbreak, dampening expectations about demand recovery in the country that normally consumes 2.5 million barrels of oil products per day.

Still trending marginally higher since early July, front month Brent futures are trading around the $45 mark, which is a no-man’s land for crude prices.

It’s neither low enough to disincentivize US shale on a breakeven price basis for new drilling and completions, nor high enough to secure sufficient investments in long-cycle projects.

But all the while the market is flooded with oil in storage and the current balance of supply and demand is not likely to create sizeable draws of stored crude very soon.

Back to tomorrow’s meeting, expect OPEC+ to communicate that they request strict compliance from all members and cheer for the success of the measures to date.

However, in reality, they are likely concerned that it is taking longer for storages to see some material level relief, while the price recovery the alliance was hoping for is also pushed further in time due to the pandemic’s persistence.

Riyadh has also talked up the demand recovery in Asia recently, but we expect the concerns about the sustainability to have increased.

Could we see a surprise tomorrow in the meeting, addressing the lagging demand recovery? It is more likely than it was in the previous meeting, but at the moment not rocking the boat seems easier to accomplish given this is just a monthly assessment of market conditions.

OPEC+ meetings are never boring however and it is very interesting to see how members will address the continuous rise of Covid-19 infections and the travel restrictions that are reinstated.

Last but not least, the markets will also be reacting to the weekly API crude stock change estimates tonight, where another draw for last week is expected, further strengthening the market storage conditions.

At least ahead of what could be another downturn in refinery runs, should we get a second wave in lockdowns.