Global oil prices rose during today’s earliest trading hours. This latest increase brought the total increase in oil prices this week to 12%. This price increase came about due to expectations that countries among the world’s leading oil producers would reduce the quantity of their upcoming oil exports.
A previously planned supply increase is now expected to be delayed due to the increasing number of Covid-19 cases around the world. Many of the world’s leading oil-producing countries, including the members of the Organization of the Petroleum Exporting Countries (OPEC), have been experiencing fresh waves of the virus. Ongoing reductions in oil supply of 7.7 million barrels per day are now likely to be extended into next year. They might also be intensified if necessary.
Any ongoing reductions carried out by OPEC members will have a significant effect on global oil supply. This is because the countries of OPEC combine to produce around 44% of all the world’s oil.
As of 1:30am GMT (9:30am Malaysian time), the value of US West Texas Intermediate (WTI) crude futures increased by US$0.35 (RM1.45). Its value thus reached US$41.80 (RM172.82) per barrel. This represented a value increase of 0.8%. Similarly, Brent crude futures increased by US$0.31 (RM1.28), placing their new value at US$44.11 (RM182.37) per barrel. This marked a 0.7% increase in value.
Oil Prices and Covid-19
The respective values of WTI and Brent futures have both increased dramatically due to recent developments regarding the Covid-19 pandemic. This was because early trial data proved that a Covid-19 vaccine which is currently being developed by BioNTech and Pfizer Inc would be effective in 90% of all cases.
Lachlan Shaw, National Australia Bank’s head of commodity research, provided his thoughts on the matter. He said, “It’s great news, no question about that. But it will take time for vaccines to be rolled out, and therefore it will take time for demand to be positively impacted by that.”
Shaw added, “In many ways the market is looking forward into 2021, to a time when we do have vaccines rolling out, and to a time where OPEC and allies have held back some of those scheduled supply increases.”
Of the 13 countries which are part of OPEC, the ones which have been hit hardest thus far by Covid-19 are Iran, Iraq, and Saudi Arabia. These three Middle Eastern countries have to date combined for almost 1.6 million cases of the virus. They therefore make up the majority of cases which have thus far been detected in OPEC countries.
Demand for additional oil has also been reduced due to the increasing number of Covid-19 infections in various regions of the world. For this reason, OPEC authorities believe that global oil demand in 2021 will recover at a slower rate than had previously been indicated by prior forecasts.
12th November 2020 16:59
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