For the fifth consecutive time, oil prices on Friday rose to $50 per barrel a mark for the Brent Crude, which went by 1.13 per cent from $49.25, while WTI Crude increased by 1.03 per cent at $46.06 on the day in question.
This increase in prices came after OPEC+ management, on Thursday unanimously sealed a compromise deal over its oil production policy slated for early next year, after days of debates.
Part of the decision reached by the management of OPEC+ was adding an additional 500,000 barrels per day (bpd) in January to its oil production quotas, which currently calls for a production cut of 7.7 million bpd. The total production cut in January will now be 7.2 million bpd. Future assigned quotas could rise or fall, and to determine those levels of oil production beyond January, OPEC+ ministers will hold additional meetings—one each month.
Even though OPEC+ group failed to deliver the expected outcome—a three-month extension of the current level of cuts, the fact that the alliance managed to exit this week’s meeting whole and with some sort of a decision reassured the market that neither the alliance nor the cartel would be breaking, at least for the next month or so.
“With the expected vaccine driven recovery in global fuel demand, this deal will go a long way to ensure the price of oil remains supported until it can stand on its own feet without support. Brent is likely to print $50/b sooner rather than later with already strong Asian demand eventually being joined by others once the Covid-19 cloud lifts,” John Hardy, Head of FX Strategy at Saxo Bank, said on Friday.
“While the deal does fall slightly short of expectations, importantly it does look more certain that the oil market will be in deficit over the first quarter of next year, and so the market should continue to draw down inventories,” said Warren Patterson, Head of Commodities Strategy at ING.