Oil prices rose to their highest level in more than eight months on November 25, driven by continued hope that energy needs will recover once a COVID-19 vaccine becomes available.
Brent crude rose 75 cents, or 1.6%, to $ 48.61 a barrel, its highest level since early March, Reuters reported, adding that US West Texas Intermediate (WTI) crude oil price was also its highest since early March closed and climbed 80 cents or more 1.8% to $ 45.71. Both benchmarks, which rose 4% on November 24, rose for the fourth time in a row.
“I think oil prices now reflect the future recovery – a recovery that will hopefully take place in two quarters.” Alexei Kokin, a senior oil and gas analyst at UralSib Financial Corp in Moscow, told New Europe on Nov. 27, “Before we get there, before we get to a point where there is a clear path towards a recovery in demand , we probably will have to wait a few quarters because I don’t think these vaccines will be in action or improve public health until mid-2021. So the market is now saying that we don’t really care – traders and oil companies and whoever – they don’t care what happens until then, they just price in the future recovery, “added Kokin.
The Organization of Petroleum Exporting Countries (OPEC) and leading non-OPEC producers led by Russia, a group called OPEC +, is tending to postpone planned production growth for next year despite a price hike. The OPEC + ministers will meet from November 30th.
Rising Libyan oil production adds to concerns about oversupply in the market. Kokin said OPEC + is expected to extend its production cuts in January at their meeting next week. “They will probably do it because it is the right thing to do if production grows,” he said, recalling that OPEC member Libya’s production is uncommitted and is growing after a ceasefire between rival groups.
Kokin also recalled that oil production in the United States is also increasing. “The US is actually growing, and January is usually a bad month for balance in the market, so it’s probably the right thing.” I think the great risk to OPEC and the threat to the very existence of OPEC + will materialize when the market starts to recover, when demand recovers strongly, then we will probably create incentives for any large manufacturer with spare capacity, with to start pumping, ”said Kokin. “But that doesn’t happen overnight, so for now they’re all in the same boat and I think they’re going to extend the quotas by a quarter and later, maybe next summer, there could be some kind of race, whoever wins market share is somehow everyone else ahead. So this risk will only exist for later, ”said the UralSib expert.
As the OPEC + meeting approaches, several OPEC members have expressed disagreements with antitrust policy. The United Arab Emirates (UAE) and Iraq want to pump more oil. “I think what is going to happen is that we are going to hear a lot of noise. We are going to hear a lot of statements all over the place for a couple of days with no clear direction, but it will probably end the same way. It will end in accordance. We will Just hear a lot of noise in the meantime. I just don’t think Iraq or the Emirates will go so far as to derail it because it’s not in their best interest, “said Kokin.
OPEC General Secretary Mohammad Sanusi BarkindoDuring the Crescent Ideas Forum on November 23, via video conference, the devastating effects of the coronavirus, the deadly number of people around the world and the blow to many sectors of the economy, especially crude oil, were highlighted.
“We are encouraged by the promising vaccine developments and the hope that they can be brought to market quickly, not only to save lives, but also to restart the global economy,” he said in comments on the OPC website.
Still, today’s oil market is being overshadowed by the revival of COVID-19 and a slower economic recovery than we envisioned in the second half of the year, the OPEC Secretary General said.
In that regard, the OPEC outlook for 2020 oil demand is now slightly above 90 million barrels a day. “This represents a sharp decrease of nearly 10 million b / d since the beginning of the year and a decrease of nearly 11 million b / d from our projections for the year in January,” said Barkindo.
In 2021, OPEC expects growth to grow to 6.2 million b / d to just over 96 million b / d, compared to our expectations for pre-coronavirus demand, which will hit nearly 102 million next year. b / d recent revisions are due to the slowing pace of economic recovery and recent COVID-19 containment measures, which are believed to have an impact on demand for transportation and industrial fuels well into next year.
Saudi Arabia and Russia reportedly invited OPEC + for last-minute talks on Nov. 28. Russian Deputy Prime Minister Alexander Novak and Saudi energy minister Abdulaziz bin SalmanBloomberg reported from the Joint Ministerial Monitoring Committee, which includes Algeria, Kazakhstan, Iraq, Nigeria and the UAE, to hold an informal video conference with their colleagues.
“We are talking about keeping the old schedule, the originally agreed schedule, or moving to a slightly modified version of the same schedule so that OPEC will keep the cuts in both cases,” Kokin told New Europe, adding: “I think that’s it (Russian President Vladimir) Putin and everyone else says the cuts will be there, they will stay, but exactly how much will be produced in January is a slightly different topic. “