Oil Prices Down As OPEC Considers Output Adjustment

Yemisi Izuora

Oil prices edged lower on Monday, the first day of 2021 trading, ahead of a meeting of the Organization of Petroleum Exporting Countries, OPEC, and allied producers to discuss output levels for February with fears for first-half demand seeping into the market as the coronavirus pandemic lingers.

Brent crude for March was at $51.76 a barrel, down 4 cents or 0.08 per cent while U.S. West Texas Intermediate crude for February fell 9 cents, or 0.2 per cent to $48.43 a barrel.

Mohammad Barkindo, Secretary General of the OPEC, said on Sunday that while crude demand is expected to rise by 5.9 million barrels per day (bpd) to 95.9 million bpd this year, the group sees plenty of downside demand risks in the first half of 2021.

“We are only beginning to emerge from a year of deep investment cuts, huge job losses and the worst crude oil demand destruction on record,” he said.

Prices ended 2020 about 20 per cent below 2019’s average, still recovering from the impact of global economic lockdown measures imposed to battle COVID-19 that slashed fuel demand, even though the world’s major producers agreed record output cuts through the year.

OPEC and allied producers including Russia, a grouping known as OPEC+, decided at a meeting last month to raise output by 500,000 barrels per day in January, anticipating a boost in demand, and agreed to meet every month to review production.

Analysts from Energy Aspects and RBC Capital said OPEC+ was likely to maintain January production levels in February.

“We think the producer group will opt to forgo any further production increases for February with COVID-19 cases continuing to climb and the slower-than-expected vaccine rollout,” RBC Capital’s Helima Croft said.

In the United States crude oil production stayed under pressure from weak prices and tepid demand, down more than 2 million barrels per day (bpd) in October from earlier this year, a government report showed on January 1.

The OPEC, and its allies, led by Russia, appear ready to adjust their plans for a gradual increase in oil output by 2 million barrels per day in the next months depending on market conditions, OPEC Secretary General Mohammed Barkindo said on Sunday.

Barkindo spoke at a meeting of experts of OPEC and allies, a group known as OPEC+, according to remarks published by OPEC. OPEC+ will meet on Monday to decide output policies for February.

Barkindo also said OPEC now expected global crude oil demand to rise to 95.9 million barrels per day in 2021, or by 5.9 million bpd from 2020.

OPEC’s latest December forecast was lower than the previous forecast of a 6.25 million bpd rise because of the lingering impact of the coronavirus pandemic.

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