Oil sinks toward $60 before OPEC+ meets to decide on supplies

Oil held steady just days before many of the world’s largest producer nations meet to discuss how much crude they should supply in the coming months.

Crude futures in New York were trading near $61 a barrel. OPEC and its allies will meet on Thursday to decide if they will ease supply curbs further after Saudi cuts pushed the groups output lower last month. Ahead of the gathering, OPEC’s largest producer has urged members to take a cautious approach, despite headline prices having their best ever first two months of a year.

Not everyone shares that caution, however. India reiterated a call for the group to increase its oil production from April. Abu Dhabi National Oil Co. will reduce supplies to Asian customers by less than previous months in April.

Crude’s strong start has been buoyed by a range of factors, including deep Saudi output cuts. The rollout of vaccines and an investor charge into commodities have also underpinned the gains.

“I don’t think OPEC+ will crash the party in the sense that it will tip the market into oversupply,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “The selloff is more like ‘great run, this is where we got to for now.’”

Prices

  • West Texas Intermediate for April delivery gained 25 cents to $60.89 a barrel at 12:45 a.m. in London
  • Brent for May settlement was up 20 cents to $63.89 a barrel

The Organization of Petroleum Exporting Countries and its allies must decide how much output is to be restored, with current reductions totaling just over 7 million barrels a day. The group is the largest actor in the oil market, with collective production covering more than 40 per cent of worldwide demand.

The buildup to Thursday’s full OPEC+ meeting starts later Tuesday with the group’s Joint Technical Committee gathering. The JTC’s role is to review market conditions and members’ conformity with supply agreements.

Investors will receive further clues later Tuesday on the market’s dynamics and outlook with Amin Nasser, chief executive officer of Saudi Aramco, and Mike Wirth, his counterpart at Chevron Corporation, among the roster of speakers due to address IHS Markit’s annual CERAWeek conference, which is virtual this year.

© 2021 Bloomberg L.P.

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