Oil Positive as Russia Considers Holding Current Output Cut

October 23, 2020
opec oil output
Image Credit: Reuters

By Adedapo Adesanya

Oil futures rose on Thursday as Russia indicated that it has not ruled out delaying production increases by the Organization of the Petroleum Exporting Countries and their allies, OPEC+ that are set to be implemented in January.

As a result, the international benchmark futures, Brent crude, rose by 1.65 per cent or 69 cents yesterday to trade at $42.42 per barrel while the US benchmark, West Texas Intermediate (WTI) crude futures, jumped by 1.52 per cent or 61 cents to $40.64 per barrel.

President Vladimir Putin of Russia said the latest sign show the cartel could restrain crude output longer as the pandemic continues to bite hard on demand again.

Under the current plan, the OPEC+ is set to relax its production curbs, adding nearly 2 million barrels a day in fresh oil production in January 2021 to 5.8 million barrels a day. The current agreement calls for output cuts of 7.7 million barrels a day through December.

OPEC+ ministers will debate whether to stick to that plan, which was decided during the depths of the oil crisis in April, or change it at a meeting scheduled for November 30 and December 1.

Fall in US weekly jobless claims to a new pandemic low and progress toward a fresh coronavirus aid package boosted prospects for energy demand and lent support to oil prices on Thursday.

The US Department of Labour report showed that the lowest initial jobless claims since March were recorded. Some 787,000 workers filed for unemployment compensation last week, a historically low level but 73,000 fewer than the previous week as the coronavirus pandemic continues to weaken the American labour market seven months after it began.

Futures gained momentum early Thursday as US House Speaker Nancy Pelosi said the two sides were nearing an economic stimulus package, boosting expectations that demand could improve.

The failure to reach an accord by now has made it impossible for lawmakers to inject money into the fight against COVID-19 or boost a sluggish economy before the November 3 election. However, Pelosi said she believes “both sides want to reach an agreement” during what she called a “serious attempt” to provide aid.

“We can do something great, and I’m still optimistic that we can do that,” she further said.

The market also held on to the boost brought about by data showing that US crude stocks rose by 1.9 million barrels last week, the Energy Information Administration (EIA) published on Wednesday.

Record new daily COVID-19 infection numbers in several US states and in Europe, along with further coronavirus lockdowns and China’s crackdown on outbound travel, all continue to threaten fuel demand.

Adedapo Adesanya

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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