By Adedapo Adesanya
Oil prices continued to head down alarmingly on Tuesday even as the Organization of the Petroleum Exporting Countries (OPEC) and its allies assured that the alliance was still working well in an effort to have options to rebalance the global crude market.
At yesterday’s session, the Brent crude futures continued to trade down at $54.02 per barrel after losing $1.75 or 2.98 percent, while the WTI crude fell below the $50 mark, selling at at $49.88 per barrel on Tuesday night after shedding $1.55 equivalent to 3.01 percent.
Prices of crude oil had been facing pressure from the COVID-19 spread across Asia and into Europe with panic reducing demand. Last week, there were reports that Saudi Arabia was planning to go ahead with a cut in its output whether Russia agrees or not with the proposal of OPEC.
Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman’s comments came due to speculation that there is tension in the OPEC+ alliance over whether to cut oil production further to 2.3 million barrels per day, a move that will help prices.
“We do communicate with each other, we use every opportunity to talk with each other,” he said in the Saudi Arabian capital of Riyadh.
“We did not run out of ideas, we haven’t lost our phones and there are always good ways of communicating through conference calls and technology is very helpful,” he added.
Prices continue to be weighed on by supply and falling demand and renewed fears surrounding the coronavirus and its impact on the global economy with cases of the virus now more than 80,000 worldwide, with about 2,700 deaths, the vast majority in China.
OPEC founding member, Iran confirmed 15 deaths from the recently spread virus with 95 cases in Iran, making it the country with the highest deaths apart from China, with Middle East countries confirming cases of the virus.
OPEC and its allies, led by Russia, will meet in Vienna, its headquarters on March 5-6 but there is uncertainty over whether the entire group will agree to cut their collective oil output further with rumors that Russia is still undecided.
Meanwhile as it stands, the alliance has reduced its total oil output by 1.7 million barrels a day in a bid to stabilize oil prices, which now faces a new threat.
The technical committee of OPEC+ met earlier in February to debate a possible oil output cut but the meeting ended with no solid agreement to speculated recommendation of 600,000 barrels per day.
However, comments from Sheikh Mohammed bin Khalifa Al Khalifa, Bahrain’s oil minister, that a cut of the recommended barrels per day, as suggested by OPEC’s joint technical committee, could be considered at next week’s OPEC meeting.
“If the market mechanism and the consensus is yes then, absolutely, yes.
“It’s the OPEC and OPEC+ mechanism thas proven very effective to balance markets and that’s what it’s there for. There is a temporary need to make some measures,” he said.
The market isn’t looking too promising going into Wednesday as United States crude inventories ended February 21, which will be released on Wednesday, are expected to rise for a fifth consecutive week.
The only possible support for prices could come from OPEC and allies Russia, whose decision to join hands to cut supply further will spur futures pointing north.
