By Adedapo Adesanya
Prices of crude oil will be greatly influenced by the proposed meeting between members of the Organisation of the Petroleum Exporting Countries (OPEC) led by Saudi Arabia, and their allies led by Russia.
Last week, an emergency meeting was called to discuss the recent decline in the price of the commodity. The gathering was fixed for today, but over the weekend, there were reports that it has been shifted to another date this week following a slight disagreement between leaders of the groups.
Prior to last Thursday, when the emergency meeting was announced, the oil market was facing supply and demand problems, which were pushing prices downward.
However, after the United States President, Mr Donald Trump, had chats with Saudi Arabia and Russia, prices went up by 25 percent.
President Trump had indicated that both Mohammed bin Salman of Saudi Arabia and Vladimir Putin of Russia would be open to production cut in the range of 10-15 million barrels per day.
Making matters more interesting was when Russia’s president, Mr Vladimir Putin, said on Friday that his country was open to production cap of around 10 million barrels per day.
Analysts have said this could make prices of the commodity to witness an astounding result this week because last month, Russia walked out of the OPEC+ meeting, which pulled down the market.
After the walk out by Russia, Saudi Arabia instigated an oil price war, sending prices to 18-year lows at a period coronavirus pandemic forced a sharp decline in demand for oil due to travel restrictions across the globe.
If an agreement is reached to put a ceiling on output, the market may experience a sharp drop in supply by as much as 10 percent globally. But this may yet prove ineffective to the demand side because most parts of the world have shutdown their economic activities in order to stop the spread of COVID-19.
The restricted travels, grounded flights, and economic slowdown may cause the demand for oil in April to decline by 20 million barrels per day year-on-year, and probably more as close to 4 billion people remain in lockdown.
Ahead of the meeting, the Executive Director of the International Energy Agency (IEA), Mr Fatih Biroh, said over the weekend that even if oil producers in the world were to agree to deep production cut, they would be unable to prevent what is sure to be an enormous global inventory, which has threatened to fill up the world’s storage.
An agreement to reach the deal may send Brent Crude, which rose to the $35 level last week, to the $40 level, a range it was before the price crash happened. The West Texas Intermediate crude, which also rallied last week, could hit the $30 level this week.
Business Post reports that the oil market was still watchful as at the time of filing this report on Monday morning, with the Brent losing $1.05 or 3.08 percent to sell at $33.05 per barrel, while the WTI shed 89 cents or 3.14 percent to trade at $27.45 per barrel.
Modupe Gbadeyanka