Proposed higher OPEC cut, Covid-19 vaccine send positive signals to oil market

Crude oil prices recorded impressive gains in four days, gaining as much as 12 percent amid high hopes that leading oil producers may deepen production cut. This, in addition to the reported news of an effective coronavirus vaccine, represents a positive development for oil-dependent countries, including Nigeria.

On Thursday, West Texas Intermediate (WTI) futures were priced at $41.53 a barrel, while Brent Crude the benchmark for Nigeria’s crude oil traded at $43.87 a barrel. Both major oil benchmarks, Brent crude and WTI traded at $39/barrel and $37/Barrel respectively prior to this week’s trading session.

In an industry event this week, Algeria’s energy minister Abdelmadjid Attar said the Organisation of Petroleum Exporting Countries (OPEC) and allies led by Russia could extend the group’s current oil production cuts into 2021 or deepen them further if market conditions require.

OPEC and allies led by Russia, a group known as OPEC+, are due to reduce their existing cuts of 7.7 million barrels per day (BPD) by about 2 million BPD in January.

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“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,” Abdelmadjid Attar said.

“This includes the possibility of extending today’s production adjustments into 2021, as well as deepening these adjustments, should market conditions require,” he added.

OPEC+ is due to meet next on November 30 and December 1, following a high-level ministerial meeting on November 17.

Attar last week said that Algeria, which currently holds the OPEC presidency, supported an extension of the current cuts into next year, adding that the next OPEC+ meeting could consider a six-month extension.

Speaking at an energy conference in Abu Dhabi, Saudi Energy Minister Prince Abdul

Aziz bin Salman said: “We’re hopeful that a solution to mitigate the virus in the form of a vaccine, and the spread of the vaccine availability, would be the most meaningful mitigator of the situation.”

He also held out the prospect of further action to control oil supply, which has risen recently and forced prices lower.

“In consultation with our friends, it might be a tweak beyond what the so-called analysts are talking about,” Abdul Aziz said at the event.

Also, US pharmaceutical giant Pfizer and its German partner Biontech said tests on more than 40,000 people indicated a 90 percent effectiveness rate of their new drug. They will pass the final hurdles for a US rollout this month, and could supply up to 50 million doses globally this year and 1.3 billion next year.

“We are a significant step closer to providing people around the world with a much-needed breakthrough to help end this global health crisis,” Pfizer chief Albert Bourla said on Reuters.