By Adedapo Adesanya
Prices of crude oil fell on Wednesday, stopping gains recorded at previous sessions on Monday and Tuesday. During the midweek trading day, there were reports of divisions among members of the Organisation of the Petroleum Exporting Countries (OPEC) on the need to further cut output.
The two-day major meeting which is set to hold on Thursday and Friday kick started talks on Tuesday ahead of arrival of oil ministers on Wednesday.
With a Joint Technical Committee of group meeting before the regular OPEC meeting, they considered bigger oil production of one million barrels per day, but ended up recommending additional cuts of at least 600,000 barrels per day.
The one million barrel is a recommendation by defacto OPEC leader, Saudi Arabia, but another producer, Libya, which has lost one million barrels per day due to the port blockade resulting from unrest in the country, thinks that there’s no need for additional cuts.
The Brent crude went down by 37 cents or 0.71 percent on Wednesday to trade at $51.50 per barrel, while the West Texas Intermediate (WTI) crude declined by 11 cents or 0.23 percent to trade at $47.07 per barrel.
While Iran has backed Saudi Arabia on the cut, Libya followed the path of Russia, which seems not to be interested in the proposal, though President Vladimir Putin said his country was considering a lesser cut.
Analysts believe this is the last hope for prices to gain even as the United States’ Federal Reserve cut interest rates on Tuesday to shield its economy from the impact of the coronavirus, which has affected prices this year.
On Wednesday, the Energy Information Administration (EIA) said for the week ending February 28, crude inventories increased by 800,000 barrels compared with expectations for a build of 2.64 million barrels.
With the market back in the negatives, top banking firm, Goldman Sachs, has again cut its Brent price forecast to $45 per barrel for April, while expecting Brent gradually recovering to $60 per barrel by the year-end.
Another multinational investment company, Morgan Stanley, also followed by cutting its second-quarter 2020 Brent price forecast to $55 per barrel and its WTI outlook to $50 on expectations that China’s oil demand growth for the year would be close to zero and that demand elsewhere may weaken because of the virus.
In the latest reports, 94,250 confirmed coronavirus cases have occurred worldwide, with more cases popping up outside China than inside while 3,214 deaths have been linked to the virus with over 60 affected countries.
Dipo Olowookere