Oil prices have reached a one-week high following reports OPEC+ plans to extend production cuts.
The benchmark Brent crude (BZ=F) hit $40 (£30.13) a barrel on Tuesday, up over 2.5% at around 3:45pm in London. The standalone crude price (CL=F) has also been gaining throughout Tuesday, reaching $38.08.
On Monday, Russian oil companies met with Energy Minister Alexander Novak to discuss putting off tapering of OPEC+ production cuts by three months.
The Organization of Petroleum Exporting Countries and its allies will “accelerate” the oil rebound at their next meeting, said Secretary-General Mohammad Barkindo in an interview with the head of the International Energy Forum.
“Demand is recovering, so also is the global economic rebound, but at a very slow speed,” he said.
He was signaling to the second COVID-19 wave that’s held world economies in suspense. Eurozone finance ministers agreed on Tuesday to review their economic response to the pandemic. France, Italy and Germany are also among the nations that have announced stricter restrictions around the movement of people. The UK enters its second lockdown on Thursday.
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“That will take a huge toll on crude demand over the winter just as OPEC+ was planning to reduce cuts to 5.7 million barrels from 7.7 currently,” said Craig Erlam, senior market analyst at OANDA Europe.
The 23-nation OPEC+ alliance is set to meet at the end of November and early December. They are largely expected to maintain current supply cuts, which amount to almost 8 million barrels a day.
“A postponement has looked highly likely for weeks and these reports further support that,” said Erlam. The “Saudi Energy Minister has previously stated that the group will do what it needs to and this is the obvious solution.”
As for where prices are heading, Erlam says Tuesday’s crude price gains have reached “big levels” with the market needing “more details if they’re going to hold.”
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