Brent Crude and WTI oil prices fell on Monday, with the hopeful mood surrounding the latest OPEC meeting undone by unsettling disunity. The OPEC+ summit finished the day without a decision on whether to delay production increases, and the ensuing discomfort of commodities traders was reflected in price movements as the day progressed.
Making its round on the news cycle was the idea that Saudi Arabia is considering withdrawing from its role as the OPEC+ Joint Ministerial Monitoring Committee co-chair. This update will do little to settle any nerves ahead of the final decision on supply, with Algerian energy minister, Abdelmajid Attar, saying that the road to recovery may be long and bumpy.
“The Saudis have been the ringmaster, so to the extent that they are going to step back, it will be potentially seen as a bit of a fraying of the newfound unity,” said John Kilduff, a partner at Again Capital LLC. “The OPEC+ meeting is front and center, it’s not great that they’re going to wait until tomorrow to make the announcement.”
Though nothing is set in stone, the current wobble in the bloc’s mood points to some participants not feeling satisfied by the current status quo. Indeed, while some of the delegates appeared to be in favour of maintaining current supply limitations during an informal meeting on Sunday, Kazakhstan and the UAE appeared to oppose this strategy.
Looking ahead, pundits question whether oil pricing should be pegged more against future optimism or current challenges. IG Senior Market Analyst, Joshua Mahony, said:
“Recent vaccine announcements have helped lift hopes of a sharp rebound in demand for crude, yet the question now is how much energy should be priced based on the future prospective demand or current reality.
“From an OPEC perspective, the question is whether they foster this recovery or send energy prices lower once again.
“The two-million barrels per day increase that would come in the absence of a deal would [deliver] a serious blow to market sentiment as much as supply/demand levels themselves, indicating that the group are unwilling to support energy prices until demand returns.”
While the upshot of this round of OPEC talks will have serious implications for the supply side of oil, the effectiveness of vaccine roll-outs will surely have a decisive part to play in pegging the level of demand – with COVID prevalence determining how quickly travel and industry can recover in 2021.
At present, Brent Crude is down by 1.78%, to $47.41. Meanwhile, WTI has fallen by 1.45%, to $44.86.