Oil prices mixed as OPEC boost countered by Libyan developments

Andrew Cummings
September 20, 2020

Both the US and Brent crude benchmarks posted weekly gains after Saudi Arabia pressed allies to stick to production quotas, Hurricane Sally cut USA production, and banks including Goldman Sachs predicted a supply deficit.

OPEC+ has been reducing production since January 2017 to help support prices and reduce global oil stockpiles.

Brent crude LCOc1 was down 6 cents at $43.24 a barrel by 0112 GMT, while US oil futures CLc1 dropped 6 cents to $40.91 a barrel.

Brent LCOc1 fell 15 cents to settle at $43.15 a barrel, but rose 8.3% for the week.

Pre-blockade Libya was producing around 1.2 million bpd, compared with just over 100,000 bpd now.

It was unclear how quickly Libya could ramp up production. "There are still concerns demand might get worse", said Phil Flynn, analyst at Price Futures Group in Chicago.

Speaking at the meeting of the Ministerial Committee for Joint Monitoring of the OPEC plus mechanism, held by videoconference, the Vice President of Economy Tareck El Aissami reaffirmed Venezuela's commitment to the entity's declaration of cooperation to achieve the stability of the global energy market.

While potentially discussing altered "compensation schedules" for the laggards in compliance - of which Iraq is the biggest, the OPEC+ panel meetings this week are not expected to recommend any changes to the current production cut deal, despite the fact that oil prices slumped in the past two weeks over mounting concerns that global oil demand recovery has stalled.

Still, a consumption recovery remains a challenge for oil markets.

He also said that the monitoring panel should discuss the impact of the coronavirus crisis as oil markets have been recovering with difficulty.

Swiss bank UBS also pointed to the possibility of undersupply, forecasting Brent would rise to $45 a barrel in the fourth quarter and to $55 by mid-2021.

Oil prices drifted lower on Friday, pausing after three days of gains, as producers prepared to resume operations in the Gulf of Mexico and data showed Saudi Arabian exports rose from record lows.

In factuality, both United States and UK crude futures' prices had opened up the day in a downscaled momentum followed by the release of a bearish job data alongside a likely USA crude inventory build amid a mass-scale evacuation at the refineries situated at the Gulf of Mexico due to the Hurricane Sally, however, crude futures' prices had propped up later on the day following upbeat remarks from OPEC alongside its allies. His comments added momentum to this week's rally, with US crude up nearly 10% over the week.

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