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article imageOPEC+ faces growing pressure to avoid another price decline

By Karen Graham     Oct 18, 2020 in Business
OPEC, Russia and allies, known as OPEC+, are reassessing a plan to ease output cuts after oil prices retreated once again on Friday amid concerns about a second wave of COVID-19 in Europe and a third wave in the U.S.
According to OPEC’s Secretary-General Mohammad Barkindo, OPEC+ palns to guard against a price decline. “I want to assure you that the OPEC, non-OPEC partnership will continue to do what it knows best, by ensuring that we don’t relapse into this almost historic plunge that we saw,” Barkindo said, reports,
However, according to a confidential document seen by Reuters the other day, OPEC+ is concerned about the second wave of the pandemic, as well as the jump in output by Libya. There is a fear this could result in a surplus in the oil market next year.
A group within OPEC called the Joint Technical Committee, met to consider "worst-case scenarios" on Thursday, something they had not done last month when they met. A surplus would indeed, threaten plans to taper output cuts by adding 2 million bpd of oil to the market in 2021.
“The earlier signs of economic recovery in some parts of the world are overshadowed by fragile conditions and growing scepticism about the pace of the recovery,” according to the document used in the panel’s monthly meeting in October.
“In particular, a resurgence of COVID-19 cases across the world and prospects for partial lockdowns in the coming winter months could compound the risks to economic and oil demand recovery,” it said.
COVID-19 kills another oil price rally
The market goes as the pandemic grows, as WTI and BrentBenchmark traded down on FRiday on the news that Europe announced new lockdown measures and several industry reports, including the IEA and OPEC, painted gloomy pictures about oil demand’s slow recovery.
And OPEC ministers are already being told to be wary of the planned increase in production. Trading houses like Mercuria Energy Group, banks including JPMorgan Chase & Co., and the IEA are pointing out the fragility of the market right now. “Adding oil to the market at such a time is not an advisable gambit,” said Natasha Kaneva, an analyst at JPMorgan in New York.
All these concerns will be considered during Monday’s online session of the Joint Ministerial Monitoring Committee, chaired by Saudi Arabian Energy Minister Prince Abdulaziz bin Salman and his Russian counterpart Alexander Novak. They may talk about it, but they won't consider next year's supply, but they can make a policy recommendation. Next year's supply quotas will be taken up at a larger joint meeting Nov. 30-Dec. 1.
On Friday at 1:04 pm, WTI was trading at $40.86 per barrel, with Brent changing hands at $42.96 per barrel, with oil prices starting to dip under the weight of added rigs.
More about Opec, Oil prices, coronavirus second wave, easing output cuts, global glut
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