Crude Prices Bearish Despite OPEC Commitment to Production Cut
By Adedapo Adesanya
Oil prices couldn’t hold a position of strength on Monday even as the Joint Ministerial Monitoring Committee (JMMC) of the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ reiterated their commitment to the production-cut agreement.
Brent crude went south by 46 cents or 1.07 per cent to $42.47 per barrel while the West Texas Intermediate (WTI) crude fell by 21 cents or 0.51 per cent to close at $40.17 per barrel.
Prices had briefly moved higher shortly after Saudi Arabia’s energy minister said OPEC+ will do what was necessary to rebalance the oil market.
Prince Abdulaziz bin Salman at a meeting on Monday said that the 23-country alliance has shown that it has the flexibility to adapt to changes in the oil market and will do what it considers necessary in the interest of all.
He explained that OPEC+ must comply with three key principles: “predict, prevent and be proactive” in the oil market.
He acknowledged, however, that OPEC+ still has work to do to get certain countries to fully compensate for past overproduction.
On the part of the alliance’s co-Chair, Russian Energy Minister, Mr Alexander Novak, said they were seeing a lot of uncertainties in the market, which is preventing the commodity from going back to pre-crisis levels. He also described current market conditions as a period of extreme volatility.
The committee isn’t a decision-making body but offers recommendations to OPEC on how to best balance the market. The next JMMC meeting will be held on November 17, and the OPEC conference and OPEC+ meetings will be held on November 30 and December 1.
A renewed rise in the COVID-19 cases and a stalling recovery of demand has prompted calls for OPEC+ to scrap plans to ease output cuts from 7.7 million barrels a day to 5.8 million barrels a day from next year but considering the situation on the ground, the market will likely have to wait for the full group meetings for any concrete decision.
Accelerating COVID-19 infections in the United States and Europe and the potential loss of energy demand pressured prices on Monday.
The global count of confirmed COVID-19 cases climbed above 40 million on Monday, while the death toll rose to 1.1 million. Several European countries have moved to increase restrictions on activities as the number of infections have risen while US infections fell below 50,000, the lowest in nearly a week, as deaths neared 220,000, according to reports.
On the supply front, Libya has increased its production to 500,000 barrels a day and exports to almost 400,000 barrels per day.