By Adedapo Adesanya
Last week saw major crude futures, Brent Crude and West Texas Intermediate (WTI), closing below $50 per barrel, signalling the worst performance for the commodity in four years as as result of fears raised by COVID-19, which has caused global recession worries and lower oil demand.
Last week, the Brent was sold for $49 per barrel, while WTI went for $44 per barrel.
However, analysts see a bright cloud this week at the oil market as it is believed that the lower prices could spur speculators, professionals and aggressive counter-trend buyers to action and will lead to rise this week.
This is dependent on certain factors which are majorly actions from the oil producer group, the Organisation of the Petroleum Exporting Countries (OPEC) and its allies.
In addition to that, a decline or headway in the coronavirus spread, which has reached over 50 countries and affected oil prices and even stocks, bonds, and currencies, could push prices north.
The OPEC situation is the near solution that the market will be banking on, especially in the area of production cuts as experienced during the market crash of 2008.
In January 2016, there was a cut in oil production from 33.8 million barrels per day to 32.5 million barrels per day. This move was then made to help prices that had fallen to $43. In 2018, the alliance also cut production further and when they met last year, they added another 500,000 barrels to bring daily cut to 1.7 million barrels.
As the group prepare to meet on Thursday and Friday (March 5 and 6) in Vienna, Austria, any pointer that oil prices will continue to drop means that OPEC may turn to the best offer on ground, production cuts of up to 600,000 barrels as recommended by a technical team last month.
There is also the consideration that Saudi Arabia is pushing for a cut in production of 1 million barrels per day, much more than first expected as reported by Business Post last week.
The de-facto OPEC leader would have the highest cut, while Kuwait, the United Arab Emirates and non-OPEC ally Russia would split the rest, and this may contribute to push the black gold in the green territory.
Oil prices are expected to rally this week based on this trend ahead of the cartel meeting, and the outcome of the gathering will tell on the eventual performance of oil prices for the first quarter of the year.
