OPEC+ Agreement Lifts Brent Nears $50 Per Barrel

By Adedapo Adesanya

The Brent crude inched closer to the $50 per barrel on Friday, December 4 after it went up by 54 cents or 1.11 per cent to settle at $49.25 per barrel.

During the trading session, the United States’ benchmark, the West Texas Intermediate (WTI) crude futures, moved up by 1.36 per cent or 62 cents to trade at $46.26 per barrel.

In recent times, the price of oil has seen an upward trend as producers finally came to a compromise, agreeing to add 500,000 barrels per day to January quotas.

The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) after its meeting this week, instead of allowing cuts to ease by 2 million barrels per day, agreed to a monthly incremental production increases of just 500,000 barrels per day.

The increase means the group will reduce production by 7.2 million barrels per day or 7 per cent of global demand from January 2021. Currently, the group has reduced supply to the market by 7.7 million barrels per day.

During the meeting, they also agreed to meet monthly from next year to assess the health of the market. The uncertainty surrounding COVID-19 makes consumption difficult to predict and this necessitated the importance of monthly OPEC+ meetings.

Although the deal was not as bullish as market analysts had expected, it was not entirely a disappointment because the reaction in oil prices suggested that OPEC+ did enough to maintain market stability.

The market is also hopeful after Britain’s approval of a COVID-19 vaccine which boosted hopes for demand recovery jumping ahead of the United States and the European Union in a possible return to normal life and recovery in oil demand.

Also strengthening the market was the news that crude inventories fell by 679,000 barrels in the week to November 27, according to data from the Energy Information Administration (EIA), defying the build the American Petroleum Institute (API) reported on Tuesday.

The market, however, faces a new level of threat as the US production recovered from the two-and-a-half-year lows touched in May mainly because shale producers have brought wells back online in response to rising prices.

The US oil rig count, an indicator of future production, rose 10 to 241 last week, the highest since May, further compounding problems in general.