Crude oil prices drop on fears of oil glut, OPEC meets today
- 17th September 2020
- Posted by: Hakeem
- Category: Commodities
Crude oil prices dropped at Asia’s trading session on Thursday morning, after rising in the two previous sessions. The slide was attributed to growing concerns on oversupplies after it re-emerged that some oil installations around the Gulf of Mexico are to resume production following Hurricane Sally’s passage.
Also, OPEC is scheduled to hold its meeting today.
What we know: At the time this report was drafted, Brent crude prices dropped 1.30% to trade at $41.76 a barrel, after surging as high as 4.2% on Wednesday.
U.S. West Texas Intermediate fell by 1.57%, to trade at 39.53/barrel, after gaining 4.9% yesterday.
The black liquid derivative price plummeted on the macro coming from a bigger-than-expected rise in U.S. distillate inventories, which include diesel and heating oil, that raised concerns about fuel demand in the world’s largest consumer of oil.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, spoke on why all eyes now seem to be on OPEC’s all-important meeting, scheduled to hold today.
“Still, it will be crucial for the OPEC JMMC to manage the perception that compliance is an issue for the group and to send a strong signal that OPEC+ remains committed to a stricter level of laggard compensation and maintaining cuts for the full duration of the OPEC+ agreement.
“And buttressing a stouter compliance view, the new problem producer UAE has assured the group they will compensate for pumping too much oil for the past few months, which has further boosted sentiment.
“As far as the post JMMC impact, beyond reaffirming compliance and perhaps some resolution on catching up quota volumes, we should expect limited new news and certainly nothing to significantly bump the crude market out of its current funk and push brent back to $45 per barrel.”
However, the OPEC+ Joint Ministerial Monitoring Committee (JMMC) meets today, though it is not widely expected to recommend any changes.