Oil Prices Extend Recovery Ahead of OPEC Meeting
Crude oil rose again on Tuesday, extending early-week gains ahead of a highly anticipated meeting of the Organization of the Petroleum Exporting Countries (OPEC). The 15-member cartel is widely expected to announce significant output cuts when it meets in Vienna on Thursday.
Crude Extends Gains
Both U.S. and global energy markets put up firm gains on Tuesday, though much of that rally had faded by late-morning. U.S. West Texas Intermediate (WTI) for January delivery reached a session high of $54.55 a barrel on the New York Mercantile Exchange. It would later consolidate at $53.20, gaining 25 cents, or 0.5%. February Brent futures peaked at $63.58 a barrel on London’s ICE futures exchange. At the time of writing, it was trading at $62.27 a barrel, gaining 58 cents, or 0.9%.
Nymex natural gas futures also rose sharply, with the January contract gaining 18 cents, or 4.1%, to $4.51 per Btu.
Energy prices surged on Monday in response to weekend trade negotiations between U.S. President Donald Trump and China’s Xi Jinping. Both leaders effectively agreed to a 90-day truce following high-level talks in Buenos Aires, Argentina. This means the U.S. will refrain from raising tariffs on Chinese imports in the new year while Beijing has vowed now to tax American automobiles.
OPEC in Focus
OPEC will likely announce new production measures on Thursday that could help crude prices recover for the remainder of the year. The Saudi-led cartel is believed to be eyeing a reduction of 1.3 million barrels per day. However, much of that reduction will rely on participation from its partners, including Russia.
Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman have agreed to cooperate on output levels, but a new deal has yet to be reached. Saudi energy minister Khalid Al-Falih told Bloomberg on Tuesday that Moscow only backs an output cut “in principle” and has not yet committed to any specific number. He said it’s unlikely that the Russians will agree no new output levels in Vienna this week. What’s more, the cartel members must evaluate market dynamics to determine how much of a reduction is needed at this time.
“We need to get together and listen to our colleagues, hear about their views on supply and demand and their projections of their own countries’ production,” Al Falih said in an interview, according to Bloomberg. “The next road to cross is whether all countries are willing to come on board and contribute to that cut.”
As Hacked reported on Monday, the 15-member cartel will soon be reduced to 14 member-states after Qatar announced a strategic pullout at the beginning of the year to focus on natural gas development. The Qatari energy minister reassured that the decision had nothing to do with its ongoing spat with Saudi Arabia, the cartel’s de facto leader.
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