Oil was steady on Monday ahead of a meeting by OPEC and its allies which may determine whether a recent rally in prices amid supply shocks and a recovery from the Covid-19 pandemic will be sustained.
Three sources told Reuters the group of oil producers was likely to stick to their existing agreement to produce an additional 400,000 barrels per day (bpd) in November.
Brent crude was up $0.2 or 0.3% at $79.48 per barrel by 1101 GMT. It rose 1.5% last week, its fourth weekly gain in a row. US oil rose $0.01 or 0.1% to $75.98, after gaining for the past six weeks.
Oil prices have risen due to a rise in global demand and supply disruptions, pushing Brent last week above $80 to a near three-year high.
“Our base case expectations for today’s OPEC meeting is that OPEC continues with its existing agreement to unwind its production cuts by around 400,000 bpd each month,” Morgan Stanley analysts said in a note.
“However if there is a reason to do so faster, it is because OPEC’s own oil consumption is also recovering at a rapid pace.”
OPEC+, which groups the Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russia, is facing pressure from some countries to add back more barrels to the market to help lower prices as demand has recovered faster than expected in some parts of the world.
OPEC+ agreed in July to boost output by 400,000 barrels per day (bpd) each month until at least April 2022 to phase out 5.8 million bpd of existing cuts.
Four OPEC+ sources told Reuters recently that producers were considering boosting output by more than that.
The earliest any increase would take place would be November since the previous OPEC+ meeting decided October volumes.
The oil price rally has also been fuelled by an even bigger increase in gas prices that have spiked 300% and are trading at around $200 per barrel in comparable terms, prompting switching to fuel oil and other crude products to generate electricity and for other industrial needs.
“The uneven nature of the post-pandemic recovery will keep demand-side uncertainties in play, giving rise to oil price volatility,” Fitch Solutions said in a note. REUTERS