By Adedapo Adesanya
Prices of crude oil faced a very difficult outcome last week as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies led by Russia could not all agree on cutting supplies by a further 600,000 barrels per day after a three-day extended meeting.
Major futures like the international-benchmark Brent and the US West Texas Intermediate crude oil finished lower in the week after starting the week with a promising news that OPEC alliance would increase their production cuts to balance the decline in demand caused by the impact of the coronavirus on China’s economy.
However, this was not the outcome as Russia said that it still needed to deliberate on the proposed extra cut before committing to it. Prices went up on Tuesday (February 4), but fell in most part of the trading week.
Energy Minister, Mr Alexander Novak, said last Friday that Russia needed a few days to analyse the oil market and would clarify its position on deeper cuts this week and whatever decision it reaches could either help prices up or settle it further down as the coronavirus, without a cure yet, continue to spread and dampen demand.
Analysts say that the economic impact of the coronavirus will reduce oil consumption for the whole 2020 by 300,000 to 500,000 bpd, amounting to about 0.5 percent of global demand.
If by this week, Russia agrees to the further cut, this means all members of the oil group, including Nigeria, will contribute to seeing that a total of 2.3 million barrels are not produced and with an underperforming commodity, this will affect expected revenue of oil dependent countries.
This week may, however, not see much improvement for oil prices as the US Energy Information Administration (EIA) showed that crude inventories rose by 3.4 million barrels in the week-ending January 31.
The hope of oil prices making any tangible upward movement rests on Russia’s decision to go along with the production cuts but if the country disagrees on the cuts, prices could plunge to the lowest in years.
As at Monday morning (GMT +1), Brent Crude was trading down at $54.38 per barrel, while the WTI Crude was also pointing south at around $50 per barrel.
