Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Oil Rises Towards $50/bbl following OPEC+ Supply Compromise

Following a cautious supply agreement between Russia and the Organisation of Petroleum Exporting Countries (OPEC), oil prices have reached their highest level since March.

On Thursday 3rd December, Russia and OPEC (a group known as OPEC+) agreed to boost oil supplies by 500,000 barrels a day from January, a cautious increase in output which eased fears of oversupply.

The agreement outlined increases to supply on a monthly basis, the quantities of which remain undefined. Despite reaching an agreement on plans for the beginning of the year, the two parties failed to reach a compromise on broader policy for the remainder of 2021.

Nevertheless, this settlement caused Brent Crude to rise by 2% to $49.72 per barrel, its highest level since early March. While US marker, West Texas Intermediate, rose to $46.51.

The dramatic price increase was also spurred by UK announcements of a Coronavirus vaccine which sparked hopes for economic recovery, topped by a weakening US dollar, making it less expensive for holders of other currencies to purchase the commodity.

However, Monica Defend, head of research at Amundi, warned: “Developed markets remain in the grip of the second wave of the pandemic and this is reflected in poor demand for travel.”

She added: “We do not expect to see oil at $55 until the second half of next year, on the basis that [COVID] vaccines can be widely distributed and aeroplanes are back in the sky.”

The increase in supply for January now means that OPEC+ are set to reduce production by 7.2 million bpd, compared with current cuts of 7.7million bpd.

Read the full story here.

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