Oil continues rise on OPEC supply hopes
LONDON, November 12, 2020 – Oil was up on Thursday morning in Asia as investors look toward continued OPEC+ supply cuts.
Brent oil futures edged up 0.18% to $43.88 by 12:02 AM ET (4:02 AM GMT) and WTI futures were up 0.27% to $41.56. Both Brent and WTi futures remained above the $40 mark.
Oil continues upwards on a combination of likely supply cuts and optimism over vaccines. Prices have risen more than 12% over the week to date, with prices well over $40 per barrel, even though the Covid-19 pandemic looks likely to rein back any growth in demand in the near future.
Markets are boosted by the Organization of Petroleum Exporting Countries and allies (OPEC+) looking likely to maintain current supply cuts into 2021, and possibly even deepening them, Algeria’s energy minister Abdelmadjid Attar said on Wednesday. Algeria is the current chair of OPEC.
“I can assure you that OPEC remains committed to taking appropriate actions, in cooperation with its partners in the Declaration of Cooperation, in a manner that is proactive and effective … this includes the possibility of extending today’s production adjustments into 2021, as well as deepening these adjustments, should market conditions require,” Attar said.
OPEC had been looking at reducing its present 7.7 million barrels per day (bpd) production cuts by 2 million bpd.
Adding to the bullish sentiment for oil is the outlook for a Covid-19 vaccine, with Pfizer Inc (NYSE:PFE) posting positive results from its phase III trial earlier in the week. The market is starting to look toward a time when the coronavirus no longer dictates global demand. Pfizer and BioNTech’s (F:22UAy) joint vaccine reported a 90% effectiveness rate.
“It’s great news, no question about that … but it will take time for vaccines to be rolled out, and therefore it will take time for demand to be positively impacted by that,” said Lachlan Shaw, National Australia Bank (OTC:NABZY) head of commodity research told Reuters.
Ever-increasing numbers of Covid-19 cases in Europe, the US and Latin America continues to put fuel demand under pressure, with OPEC acknowledging that demand will rebound more slowly in 2021 than previously estimated.
“In many ways the market is looking forward into 2021, to a time when we do have vaccines rolling out, and to a time where OPEC and allies have held back some of those scheduled supply increases,” Shaw said.
OPEC+ will convene for a high-level ministerial meeting on Nov. 17, followed by further meetings on Nov. 30 and Dec. 1. Investors also await the US Energy Information Administration’s crude oil supply data, due later in the day.