Oil Steady with OPEC+ Warning of Precarious Outlook

Daniel Fowler
October 20, 2020

"In particular, a resurgence of COVID-19 cases across the world and the prospect of a partial lockdown in the coming winter months could exacerbate risks to the economic recovery and oil demand", he said.

Oil prices moved lower on Monday, weighed down by a continued rise in global coronavirus cases.

OPEC and its allies fear a prolonged second wave of the COVID-19 pandemic and a jump in Libyan output could push the oil market into surplus next year, according to a confidential document seen by Reuters, a gloomier outlook than just a month ago.

Kuwait supports all efforts by OPEC member countries to restore stability in the global oil markets following the sharp decline in demand because of the coronavirus pandemic, the Gulf country's Oil Minister said Monday.

Money managers cut their net long U.S. crude futures and options positions by 9,442 contracts to 288,454 in the week to October 13, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

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In March, the countries participating in the OPEC + deal did not agree on the level of oil production, after which it became known that Saudi Arabia was planning to increase production to 10-12 million barrels per day and reduce the price of its oil.

Libya has significantly boosted its production after the easing of a blockade by eastern forces in September.

OPEC and allied producers on Monday pledged action to support the oil market as concerns mounted that a second wave of COVID-19 infections could hobble demand and an earlier plan to raise output from next year would further depress prices. That involved commercial inventories from major world consumers remaining higher than the five-year average in 2021, rather than falling below that mark. An OPEC+ joint ministerial monitoring committee, comprising top producers Saudi Arabia and Russian Federation, is scheduled to meet from 13:30 GMT. The JMMC can make a policy recommendation.

"We expect on Monday's meeting some strong words on compensating for (members') undercompliance", said Paola Rodriguez-Masiu, Rystad Energy's senior oil markets analyst.

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