Many investors are awaiting the OPEC+ decision on whether they plan to increase oil production even as the Covid-19 virus brings fear of another spike in cases.
Earlier today, futures began an up and down pattern of gains and losses. OPEC and its allies gathered to discuss whether the market can handle another supply increase in February after boosting supply output of 500,000 barrels a day in January. Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman said, “there is a light at the end of the tunnel, but we must not slacken its resolve.”
Oil fell in US equities, and in other countries there are signs of lockdowns that could once again affect the oil demand. Germany has plans to extend their lockdown beyond January 10th with stricter regulations in place. Japan’s Prime Minister, Yoshihide Suga is considering a state of emergency for the Tokyo area, with cases continuing to rise. Recent reports show that cases have rose more than 1,300 new coronavirus cases in a single day, for the first time.
Bart Melek, TD Securities Commodity strategists said, “A 500,000 barrel a day increase will still keep the market in a deficit, which argues that the cartel will stick to the plan to taper output cuts. A significant amount of OPEC spare capacity will provide an offset to demand growth, which should rally in energy markets from breaking away.”
After rising from 10-month high, crude futures approached $50 a barrel. “People are expecting at least not bad news from OPEC’s meeting. They may raise production for February, but they are not expected to make a major move. So much is still dominated by the Covid impact on demand and the uncertainty on when demand is going to come back,” said Micheal Lynch, president of Strategic Energy & Economic Research.
OPEC+ ministers ended their recent panel discussion without any new policy recommendations, leaving everything on the table for the meeting this afternoon.
- WTI fell 74 cents to $47.78 a barrel for February
- Brent fell 50 cents to $51.30 a barrel for the month of March