Crude oil prices up 12% in barely 4 days, triggered by OPEC+ proposed cuts

Crude oil prices recorded impressive gains in barely four days, gaining as much as 12% amid high hopes that the world’s leading oil producers will suspend plans on increasing oil supply as soaring cases of COVID-19 onslaughts distort fuel demand.

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What you should know

At the time of drafting this report, U.S. West Texas Intermediate (WTI) futures were priced at $41.53 a barrel, while Brent Crude traded at $43.87 a barrel.

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• It should be noted that both major oil benchmarks, Brent crude and WTI traded at $39/barrel and $37/Barrel respectively prior to this week’s trading session.
• Crude oil prices are up 12% in barely four days on the macro that such bailout from OPEC would ease pressure on the spiral fall of the black fossil, coupled with the news on Pfizer’s COVID-19 vaccine, gave the bulls enough energy to break above $43/barrel in the case of Brent crude.
• Algeria’s Energy Minister had earlier disclosed yesterday, on OPEC+ would most likely consider extending current production cuts of 7.7 million (BPD) into 2021, or deepen them more if the case arises.

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What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in an explanatory note to Nairametrics, spoke on the present fundamentals pushing crude oil prices to record high amid COVID-19 resurgence.

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“At this time, Christmas came early to the producers, where selling was evident, as higher prices invited December hedging. But for those investors chasing the prompt market higher on the vaccine impulse, when they should be getting bulled up on the back end of the curve, they might end up with the proverbial lump of coal in their holiday stocking, as it is the pandemic that counts first before the vaccine, when it comes to the prompt delivery for oil markets. The medical advances are likely to help the economy and oil market normalize through 2021.”

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What to expect

Still, the winter of gloom continues to look challenging, and hence OPEC+ supply-side action to counter demand softness will be critical in the near-term.