Oil prices ticked up on Monday, ringing in the New Year with gains ahead of a meeting of leading global oil producers.
Members of the Organization of the Petroleum Exporting Countries and their allies (OPEC+) were set to discuss output for February at a session on Monday.
Despite optimism and rising prices, fears on demand are lingering following crushing losses in early 2020 as oil demand dipped due to shutdowns and flight groundings related to the COVID-19 pandemic.
OPEC’s secretary general Mohammad Barkindo had said on Sunday that while crude demand is tipped to rise by 5.9 million barrels per day, to almost 100 million, there is still high potential for risk in the first half of the year.
He noted 2020’s deep investment cuts, job losses and destruction of crude oil demand, in a year where prices had ended a fifth below 2019’s average.
Jeffrey Halley, senior markets analyst for Asia Pacific at Oanda, said: “Markets would appear to be pricing that oil production targets will be held unchanged this month. However, if discord emerges, and the meeting drags on over more than one day, oil prices could correct lower from here until the situation becomes more evident.
“There is plenty of event risk in the week ahead even without OPEC+. Pullbacks from these levels could be rapid and quite deep, although it would take a huge move, probably caused by OPEC+, to upset the underlying bullish uptrend.”
OPEC+ agreed to increase production by half a million barrels per day in January after their last meeting at the start of December.
Since April, OPEC+ has progressively reduced the production cuts and is expected to release an extra 500,000 barrels per day (bpd) into the market in January.
But, despite a pickup in prices towards the end of last year, there is still some uncertainty over the market levels for petroleum.
COVID-19 prompted OPEC to increase its meetings to deal with the gravity of the situation for crude producers, allowing OPEC+ to maintain a strong influence on the oil market.
The 13 members of the OPEC, led by Saudi Arabia, and their six allies led by Russia, agreed to meet at the beginning of each month to decide on any adjustments to production volumes for the following month.
They had been meeting twice a year at OPEC’s headquarters in Vienna prior to the pandemic.
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