By Adedapo Adesanya
The oil market alternated between gains and losses last week as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies led by Russia and other countries disclosed that they will start lowering record cuts from next month.
The news brought about fresh rounds of both supply and demand worries for the market last week,. The market is still facing headwinds of the coronavirus pandemic since the beginning of the year.
On Friday, Brent crude oil finished the session lower by 23 cents or 0.53 per cent to $43.14 per barrel, while the US West Texas Intermediate crude oil lost 18 cents or 0.44 per cent to settled at $40.75 per share.
On the supply side, the decision by the cartel means the usual 9.7 million barrels that have been scheduled to be removed daily for the past three months since May will be reduced to 7.7 million barrels per day due to forecasts that predicted demand recovery.
However, this demand recovery is being threatened by surging cases of the COVID-19 pandemic like the US, Spain, Australia, Brazil, and some countries in Asia. These places have continued to record higher cases, spurring fresh rounds of business closures.
Analysts believe that if cases continue to spike, people will be forced to stay at home and will consequently result into a reduction in the demand for fuel and more crude oil in the system, a factor, like in the past, has affected prices.
Notably, market analysts said that if prices collapse, it won’t be solely because of the tapering, but because of a combination of smaller supply cuts and falling demand.
Within a period, the market will be able to adjust the tapering, but it will have a hard time adjusting to the drop in demand because of the uncertainty surrounding it.
It is going to be a very strenuous week on prices as early morning Monday trading as shown. Brent crude is down at $42.89 per barrel while the WTI crude is at $40.34 per barrel.
Dipo Olowookere