Oil prices slump, OPEC+ meets today

Crude oil prices were trading lower at the fourth trading session of the week, as major oil producers including Saudi Arabia and Russia are set to meet on oil production cuts extension set in place in the first wave of the COVID-19 onslaughts.

• At the timing of writing this report, Brent crude futures prices were down by 0.3%, trading at $48.10/barrel after gaining 1.8% yesterday.
• U.S. based oil contract, West Texas Intermediate futures, traded at $45.11/barrel, having ended 1.6% higher at Wednesday trading session.
• OPEC+ are resuming talks in discussing policies for next year after earlier talks produced no agreement on how to tackle soft energy demand amid a new COVID-19 wave.
• Oil traders anticipate that the popularly known oil cartel group will roll over oil cuts of 7.7 million barrels per day or about 8% of global oil production, at least until the end of Q1 2021.
• But after hopes coming from three promising COVID-19 vaccines set for the market triggered a rally in oil prices at the end of last month, some major oil stakeholders recently questioned if such prevailing cuts are still needed.

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, gave vital insights on leading fundamentals weighing on oil prices including the expected outcome from the all-important meeting scheduled to hold today,

“I expect oil to be whippy but confined to current ranges, until OPEC+ signals the all-clear for traders to shift oil prices back to recent highs.

Reports were hitting the streets of unnamed OPEC+ delegates saying that progress is being made on talks about production cuts. That, combined with the surprise US inventory draw today, has triggered a move up in oil.

“Discussions will continue in earnest and I think given what is at stake, the base case should be that OPEC+ agrees to an extension of cuts. There are clear tensions within OPEC that may undermine market confidence in the OPEC+ deal from now on.

“It will be more important than ever for OPEC+ to present a unified front, while waiting for demand to recover when the vaccine becomes widely distributed.”

What to expect

Any sign that OPEC+ is struggling to reach an agreement could weigh down on oil prices, at least in the near term.