Oil price recovers early losses as OPEC+ in limbo over production hike


OPEC decision on Tuesday

As I observed in my previous post, some members of the OPEC+ are reluctant to go ahead with the anticipated hike in the production of crude oil; prolonging the session for another day or even more, is a clear sign that coming to an agreement in the current circumstances is easier said than done.

It seems that Russia still believes that the alliance can agree upon its proposed increase in production – 500,000 bpd.

Saudi Arabia, however, does not think that it is a step in the right direction, especially at a time when the developed world faces an unprecedented situation with the evolving Coronavirus; you just have to read between the lines of what the Secretary General of the cartel, Mohammad Barkindo, said on Sunday to sense the mood.

In short, the prospect of increasing production by half a million barrels per day is in limbo as of Monday.

In another development, Saudi’s closest ally in the region, the UAE, also wants to raise the production to a significant level in the hope of increasing revenues for its many ambitious projects.

Amidst the uncertainty of the outcome of the OPEC+ at their latest meeting, there was a ray of hope on geo-political front: Kuwait announced that Saudi Arabia was about to open up airspace as well as land and sea borders to Qatar in a diplomatic breakthrough brokered by the US; Qatar’s Emir, meanwhile, has accepted an invitation by the King of Saudi Arabia to attend the meeting of the GCC, the Gulf Cooperation Council.

As the mixture of good and bad news makes ripples in the markets, oil price may react with some fluctuations in the coming weeks. Since most of the other factors that usually determine the oil price are in favour of the current level, anything near to a crash is highly unlikely in the short run.



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