Oil prices set for weekly gain ahead of OPEC+ meeting
Oil prices were mixed on Friday but remained on course for a fourth straight week of gains ahead of an OPEC+ meeting early next week.
Brent crude for January rose 19 cents, or 0.4%, to $47.99 a barrel and the more active February contract gained 24 cents to $48.03.
West Texas Intermediate, meanwhile, was down 40 cents, or 0.9%, at $45.32.
Both benchmarks are up about 7% over the week after encouraging news on potential COVID-19 vaccines from AstraZeneca and others. However, questions have been raised over AstraZeneca’s “vaccine for the world”, with several scientists sounding caution over the trial results.
“While a successful vaccine rollout should break the link between infection and mobility, even then global oil demand will likely only reach its pre-pandemic run rate by mid-2022,” JP Morgan said.
OPEC alliance considers delay to its output hike, but faces a U.S. shale industry ‘itching to drill again’
Oil-producing group OPEC, and its allies, will likely delay an output hike at its meeting this week as it weighs positive vaccine news against new coronavirus lockdowns and resurgent shale drilling in the U.S.
The coalition known as OPEC+, which comprises some of the world’s largest crude producers, will begin a two-day meeting Monday to discuss the next phase of its production policy.
It agreed to the largest single output cut in history back in April, but that reduction of 9.7 million barrels per day was subsequently scaled back to 7.7 million in August. Taking oil off the market, with OPEC kingpin Saudi Arabia often bearing the brunt, usually boosts crude prices and helps their commodity-focused economies.
Price predictions
Caroline Bain, chief commodities economist at Capital Economics, believes the meetings on Monday and Tuesday won’t spring any surprises, saying an extension of the production cut is largely priced in.
“We now think that the oil price (Brent) will stand at $60 per barrel by end-2021,” she said in a research note Friday, revising forecasts due to the encouraging vaccine trial data from pharma giants that could help reopen economies after the coronavirus crisis.
Many market watchers see both oil benchmarks at, or around, $50 a barrel over the next year as demand slowly builds after the shock seen in March and April. The price of U.S. oil plunged into negative territory during the first wave of the pandemic as Saudi Arabia and Russia stuttered over an output deal. But Brent crude futures now stand at $48.18 a barrel, with U.S. West Texas Intermediate futures at $45.52.
Ron Smith, an oil and gas analyst at BCS Global Markets, believes there are reasons to be bullish on prices, especially on a six-month view. In a research note emailed to CNBC last week, he said that oil could go to the mid-$50s by the end of 2021.
Reference: CNBC
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