New OPEC Deal to Keep Crude Oil Prices High This Week

crude oil

By Adedapo Adesanya

Oil prices are expected to pull a good performance this week on the back of the deal reached by the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia last Friday.

At its meeting last Thursday and Friday in Vienna, Austria, the cartel announced one of the deepest output cuts to support crude prices and prevent glut in 2020.

After agreeing to an extended 500,000 barrels per day (bpd) cut that would see output reduced by 1.7 million bpd from 1.2 million bpd, major oil futures rose, particularly the Brent, to $64 per barrel, with the West Texas Intermediate (WTI) circulating close to $59 per barrel.

Close to home, the Bonny Light produced by Nigeria went up as high as $65 per barrel with the Brass River and the the Qua Iboe futures trading at $66 and $65 per barrel respectively.

According to the latest forecast by Goldman Sachs analysts, the 2020 Brent oil price forecast has been raised to $63 from $60 on the expectation that the global oil supply-demand balances would be 0.3 million barrels per day tighter than the previous forecast.

This upward revision of the price target comes after the OPEC and Russia decided to deepen the existing 1.2 million barrels per day cut in output by additional 500,000 barrels per day through the end of March 2020.

One major issue that may affect oil prices is the US-China trade problem that has been giving a negative outlook to the commodity and global demand as the latest reports show that China exports to the United States amid the ongoing trade war decreased 23 percent from a year earlier to $35.6 billion, according to customs data which was revealed on Sunday.

With this, it shows that China is running a trade surplus with the US of $24.6 billion. This also reflects in its global exports which fell by 1.1 percent from a year earlier to $221.7 billion.

Both countries hope to first reach a phase one deal where no new tariffs would be placed on Chinese goods in exchange for China buying U.S. agricultural products.

They have disagreed on the agriculture purchases which is affecting American farmers, with President Donald Trump of the US asking China to buy $40 to $50 billion of U.S. farm goods a year, an increase over the $8.6 billion China bought from the U.S. in 2018.

If any positives make the news this week, oil prices will act upon them and keep an upward trend compared to the prices it opened on Monday. As at the time of the report, the Brent and the WTI are trading down at $64.03 and $58.81 per barrel.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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