By Adedapo Adesanya
Oil prices plunged on Monday ahead of a key meeting of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) scheduled for this week.
Members of the oil cartel are expected to meet in a few days to discuss happenings at the global market and it is believed that they would support the return of more supply to the fast-tightening market.
In recent times, the price of the commodity had risen but yesterday, the Brent crude futures lost $1.04 or 1.61 per cent to trade at $63.38 per barrel, while the West Texas Intermediate (WTI) crude futures dropped by 86 cents or 1.4 per cent to sell at $60.64 per barrel.
When OPEC+ meets, it must decide how much output gets restored and at what pace with current reductions amounting to just over 7 million barrels a day, or 7 per cent of global supply.
The 23-nation coalition will choose whether to revive a 500,000-barrel tranche in April, and in addition, whether Saudi Arabia will confirm if the extra 1 million barrels it voluntarily took off in February and March will return.
Market analysts believe that now that oil is back at $60, there’s going to be a push to ease the cuts but they noted that the question is how much are they going to bring back.
They also added that the biggest risk is if supply presumptions think things are back to pre-pandemic demand in 2021 and that turns out not to be the case.
The alliance gathers on Thursday and is expected to ease the output restrictions after prices got off to their best-ever start to a year.
Business Post observed yesterday, even news that the US House of Representatives recently passed President Joe Biden’s proposed $1.9 trillion COVID relief package couldn’t help the market hold well in the positive territory after lifting sentiment.
The progress in the stimulus package approval after weeks of debates will now need Senate approval. If approved by the Senate, the stimulus package would pay for vaccines and medical supplies, and send a new round of emergency financial aid to households and small businesses, which will have a direct impact on energy demand.
The market also went down over data showing that Chinese oil crude consumption is slowing. China’s factory activity growth slipped to a nine-month low in February, sounding alarms over Chinese crude buying and pressuring oil prices.
Surprisingly, good economic data came out of Germany, where manufacturing saw strong growth in February, thanks to exports. Despite the lockdown in Europe’s biggest economy, German activity hit its highest level in more than three years.
Dipo Olowookere