By Adedapo Adesanya
Leaders of the Organisation of the Petroleum Exporting Countries (OPEC) adjourned their virtual meeting on Monday when they could not agree on what to do on the tightening of supply of oil to the market.
Before the meeting, there had been reports that efforts would be made to extend the current output cut deal into next year, but some members were against this because of their present economic situation, including Nigeria.
As the talks were on and no agreement reached, the oil market suffered a slip on Monday as the Brent crude lost 59 cents or 1.22 per cent to sell at $47.59 per barrel, while the United States’ benchmark crude lost 33 cents or 0.72 per cent to trade at $45.20 per barrel.
The oil cartel, led by Saudi Arabia, will reconvene Tuesday, according to a short statement after the meeting.
The second day of talks will include additional members from a wider group known as OPEC+ led by Russia and other non-OPEC members.
Business Post had reported that speculation was rife that the cartel would agree to keep its production at a reduced level for a longer period of time in order to support oil prices as the economic slowdown caused by the coronavirus pandemic.
However with recent signs that several drug companies showed promising results from COVID-19 vaccine trials, the market was hopeful that demand would recover.
Despite this, some analysts warn that oil demand may never fully recover because the coronavirus travel restrictions among other preventive measures may have put a permanent dent in oil demand.
Additionally, the coalition has been restricting its output for months, straining its members especially major oil-dependents and there are tensions over some countries that overproduce.
There are predictions that the group may curtail current cut levels for at least three months in 2021, however, there are some countries resisting that idea.
One major pointer from Monday’s meeting was that many OPEC members are not happy with having to reduce output because of the strain on their budgets. However, oil prices have improved due to the cuts and overproducing may yet drive prices down.
OPEC and its allies agreed to cut production in April by about 10 million barrels per day through July. Then in August, as some cities around the world took steps to re-open their economies, the group upped its production by cutting 7.7 million barrels per day through year-end. They planned to increase production in January so that the cuts would be just 5.8 million barrels per day.
Amid this development, the producers also have to deal with Libya, which was exempt from cuts because of instability in the country. It has ramped up production to about 1 million barrels per day, up from a low of just 100,000 barrels less than six months ago.
A fresh news that may help the market in coming days is news that pharmaceutical company, Moderna intends to apply to the US Food and Drug Administration for authorization of its COVID-19 vaccine.
The company will ask the FDA to review an expanded data set showing the vaccine is 94.1 per cent effective at preventing COVID-19 and 100 per cent effective at preventing severe cases of the disease.
