By Adedapo Adesanya
Oil prices, having climbed to a 13-month peak last month, continued to slide at the global market and on Tuesday, they further depreciated.
This was caused by expectations that the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) may be set to increase global supply.
As a result, the price of the Brent crude further lost 96 cents or 1.51 per cent to trade at $62.73 per barrel, while the West Texas Intermediate (WTI) crude dropped 91 cents or 1.50 per cent to sell at $59.73 per barrel.
OPEC+ had last year agreed to reduce the volume of oil it produces in an effort to prop up prices as strict public health measures coincided with an unprecedented fuel demand shock.
This week’s supply decision comes at a time when oil prices have rebounded to pre-virus levels, production in the U.S. has taken a hit from freezing storms and the coronavirus pandemic continues to cloud the outlook.
OPEC’s de facto leader Saudi Arabia has publicly encouraged allied partners to remain extremely cautious on production policy, warning the group to ensure effectiveness as it seeks to navigate the ongoing COVID-19 crisis.
Non-OPEC leader, Russia, meanwhile, has indicated it wants to push ahead with a supply increase.
Analysts broadly expect OPEC+ to hike output from current levels, but questions remain over how much exactly and which countries will be affected.
The alliance initially agreed to cut oil production by a record of 9.7 million barrels per day last year, before easing cuts to 7.7 million and eventually 7.2 million from January.
In addition, Saudi Arabia has since taken on voluntary cuts of 1 million barrels per day from the beginning of February through March.
The reality is pointing to the fact that Russia will likely be allowed to increase output further while Saudi Arabia will return some or even all of its 1 million barrels per day unilateral cut.
Analysts expect OPEC+ to discuss allowing as much as 1.3 million barrels per day back into the market on Thursday.
Modupe Gbadeyanka