On Friday, after a rally that sent them up nearly 30 percent in November, the oil markets ended in dispersed order as traders eagerly await the next decision of OPEC on its production cuts.
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For the December contract on Nymex, the price of U.S. light crude (WTI) rose 0.39 percent to $45.53 a barrel, while the Brent contract for January delivery fell -0.88 percent to $48.18. However, the two global benchmarks showed a fourth consecutive week of growth (with a weekly gain of more than 7%), thanks to hopes of a “return to normal life” thanks to the Covid-19 vaccines. WTI is now up 27 percent since the beginning of November and Brent has regained 28.3 percent, and both are at their peak since last March.
Investors were cautious in the run-up to the OPEC meeting next Monday and Tuesday, which could lead to an extension of supply reduction measures beyond 31 December to support prices in the face of the latest Covid-19 surge.
According to Bloomberg sources, on Saturday, two days before the official conference, Saudi Arabia and Russia convened an alliance for last-minute negotiations, which is expected to lead to continued supply from the group and its allies at current levels for few more months due to continued uncertainty about the strength of demand.
However, considering the public concerns from Iraq and Nigeria and the private disputes with the United Arab Emirates, the decision is not at all certain. “The technical foundations have been laid for OPEC to postpone the gradual increase in production,” Harry Tchilinguirian, Head of Commodity Strategy at BNP Paribas, told the agency. “The political foundations must now be put in place.”
According to a letter seen by Bloomberg, the two key members of the group, Russian Deputy Prime Minister Alexander Novak and Saudi Energy Minister Abdulaziz bin Salman, called for an informal video conference with their counterparts on the Joint Ministerial Monitoring Committee, which includes Algeria, Kazakhstan, Iraq, Nigeria and the UAE.
In order to compensate for the historic fall in demand for black gold, OPEC, which involves 23 nations, made massive production cuts at the height of the pandemic. In expectation of a global economic recovery, the alliance had expected to ease some of the constraints in early 2021, taking back about 1.9 million barrels per day or about 2 percent of global demand.