By Adedapo Adesanya
Crude prices went southwards on Monday as members of the Organisation of the Petroleum Exporting Countries (OPEC) and allied countries including Russia adjourned a meeting weighing whether to increase production further next month.
The international benchmark futures, Brent crude, lost 70 cents or 1.36 per cent to trade at $50.80 per barrel while the US benchmark West Texas Intermediate (WTI) crude futures moved down by 2.25 per cent or $1.09 to trade at $47.43 per barrel.
Traders weighed the risk of the delay as the pandemic continues to affect demand for energy and create uncertainty about when recovery might come.
The oil-producing countries are set to meet on Tuesday.
According to reports, producers were split on Monday over increasing output from February as some feared a hit from new coronavirus lockdowns, while Russia and Kazakhstan said demand recovery justified higher production.
At the meeting, the OPEC leadership said that demand remained fragile for transport fuels including for aircraft and that the cartel needed to move carefully even as the rollout of vaccination programs raises hopes for a return to more normal travel habits.
Last month, the group decided to add back a modest 500,000 barrels per day to the oil market, and to review production monthly with a goal of restoring 2 million barrels a day.
OPEC+ is currently maintaining cuts at 7.2 million barrels per day following the addition of 500, 000 barrels from the beginning of the year.
Some members have questioned the need to increase more from next month due to an upsurge in the COVID-19 pandemic. Others argued that raising production would increase revenues for producing countries that have seen their budgets hard hit by lower prices but pumping too much too soon could undermine the modest price rebound.
Oil prices had improved in the last week’s of December on positive vaccine news and hopes for a rebound in demand once vaccinations started on a large scale but new restrictions in Europe and other parts of the world as cases surge has stifled this hope.
Adding to the bearish outcome, England on Monday night announced a new six weeks coronavirus lockdown while Germany was weighing whether to allow a delay in administering a second dose of the COVID-19 vaccine to make scarce supplies go further.
However, the market will be studying tensions in the Middle East as Iran’s Revolutionary Guards seized a South Korean-flagged tanker in Gulf waters and Iran resumed uranium enrichment at an underground nuclear facility.
