Oil Gains Ground As Saudi Arabia Pushes For Full Compliance With OPEC+ DealOil continues its upside move as OPEC+ is ready to meet in October in case oil demand shows weakness.
Oil Video 18.09.20.
Saudi Arabia Puts Pressure On Laggards
WTI oil continues to move higher after the OPEC+ meeting which took place on Thursday. OPEC+ was set to discuss the performance of countries that failed to comply with the production cut deal. The main laggards are Iraq, Nigeria and United Arab Emirates.
Oil got an additional boost after Saudi Arabia put significant pressure on the laggards and gave them time until December to make up for their previous overproduction.
Interestingly, Saudi Arabia warned traders against speculating in the oil market and promised to make the market unpredictable to hurt speculators. Most likely, Saudi Arabia is not satisified with the recent sell-off which it attributes to speculating activity.
Saudi Arabia Energy Minister has reportedly stated that OPEC+ was ready to hold an extraordinary meeting in October if oil demand was weaker than expected. These words were interpreted as Saudi Arabia’s readiness to make additional oil production cuts in case oil prices fall far below the $40 level.
While Saudi Arabia managed to deliver strong verbal support to the oil market, it remains to be seen whether OPEC+ members are ready for additional oil production cuts at a time when their budgets are under significant pressure.
Russia Believes That Oil Demand Will Get Back To Normal In The Second Quarter Of 2021
Russia also decided to offer verbal support to the market, and its Energy Minister Alexander Novak stated that oil demand should fully recover in the second quarter of 2021.
This is an optimistic forecast given the current situation on the coronavirus front. Israel has just entered a second lockdown while European countries are introducing new virus containment measures.
The recent reports from OPEC and IEA also noted a slowdown in oil demand recovery.
In this light, Russia’s oil demand recovery forecast looks like a way to support the market rather than a true forecast.
Oil demand cannot get back to normal without a normalization of travel demand which is impossible before the world gets a COVID-19 vaccine and mass vaccinations begin.
While several vaccines may be ready by the end of this year, their mass production will take time. Mass vaccinations are also not an easy process. In this light, a full return to normal in the second quarter of 2021 looks like a very optimistic prediction.
For a look at all of today’s economic events, check out our economic calendar.