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The crude oil market finally hits a limbo with prices of Brent futures struggling around USD 50 mark to trade in a range from USD 49.00 per barrel to USD 48.00 per barrel after showing an immense recovery.
Image Source: © Kalkine Group 2020
The Brent futures more than tripled since the March 2020 quarter, with Brent oil soaring from the levels of USD 15.98 per barrel (intraday low on 22 April 2020) to reach a high of USD 49.09 per barrel (as on 28 November 2020), marking a price appreciation of ~ 207 per cent.
The oil market posted one of the strongest gains of the current year in November 2020 with prices surging ~ 37.27 per cent ahead of the OPEC meeting.
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OPEC and Allies Postpone Production Cut Decision
However, the decision by the oil cartel and its allies to delay a commitment to further extending the production cuts until the end of the current week is keeping a lid on November’s gain.
Furthermore, some indications of discontent among the 23 members of OPEC concerning the extension of the production cut ahead is also putting the market participants in doubt.
The group met on Monday to reach a conclusion concerning the roll-over of the production cuts into next year to keep the market balanced and price buoyant. However, the cartel failed to do so.
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Initially, the OPEC and its allies decided to trim the supply chain in May 2020 to support oil prices across the global front. The initial production cut was decided to eventually loosen in January 2020, bringing another 2 million barrels of oil per day back onto the market.
Recently, OPEC and allies had been on track to eventually ease its production cuts in January 2020; however, with the prices remaining in the $20 zone for a while, the group gave an indication that it would do whatever necessary to support the oil market, including extending the production cut ahead in 2021.
To Know More, Do Read: OPEC and Allies Ease Supply Cuts, Market Goes Range-Bound; Things You Should Know
While the oil kingpin Saudi has been one of the major advocates of extending the production cut, it suggested in the previous OPEC meeting that the future production cut would eventually be a result of allies and other OPEC members following and meeting the previous production cuts guidelines.
Many OPEC members pulled higher crude oil at the starting of the production cut agreement in May 2020 to support their oil-dependent economies.
However, with the Saudi taking reins on hand, many OPEC members have now demonstrated a better adherence to the initial production cut agreement, which might open up some supply ahead.
