By Adedapo Adesanya
Prices of crude oil rebounded on Monday by more than five percent, starting a recovery from losses recorded last week.
This growth followed renewed hopes that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) will agree to cut production when they meet on March 5 and 6.
Yesterday, the Brent crude gained 5.5 percent or $2.73 to trade at $52.40 per barrel after the futures shed over 14 percent last week. On its part, the US West Texas Intermediate (WTI) crude rose by 5.47 percent equivalent to $2.45 to settle at $47.21 per barrel. This futures had dropped over 16 percent at the market last week.
The anticipated deeper output cuts by OPEC+ is likely going to be a major decider for the oil market as an additional production cut in the second quarter is now being considered with fears that the coronavirus outbreak will erode oil demand.
A recommendation of a further cut of 600,000 barrels was earlier suggested by a joint technical team, but this didn’t see the light because Russia wasn’t decisive about it. However, a comment on Monday implied that the European nation may have changed its mind.
Russian Energy Minister, Mr Alexander Novak, said on Monday that Moscow was evaluating the smaller oil production cut proposal made by OPEC+.
“We are looking at the recommendation made by the (joint) technical committee,” Mr Novak was quoted by Reuters on Monday.
He, however, added that Russia had not yet received a proposal to deepen cuts by one million barrels per day.
Last Friday, there were reports that de facto OPEC leader, Saudi Arabia, was proposing a larger cut of one million barrels per day with the Kingdom taking the largest share cuts while other countries like Russia, United Arab Emirates (UAE), and Kuwait shared the remaining.
Mr Novak’s comment on Monday has suggested the possibility of this new proposal, in addition to its decision not to hastily agree to the previously recommended cuts.
The OPEC+ meeting will take place in Vienna, Austria on Thursday and Friday and decisions taken will be crucial especially if no improvements are recorded before that time.
Prices also found support from expectations that global central banks are ready to support economies amid the coronavirus outbreak.
Analysts project that the world’s central banks, including the Federal Reserve in the United States will move soon to prevent deeper economic fallout from the fast-spreading and deadly coronavirus which has affected over 89,000 people across 58 countries while over 3,000 people have died.
