Oil prices have inched up today as the market has already priced in oil demand concerns and now awaits for the OPEC+ meeting.
Bjornar Tonhaugen, Rystad Energy's Head of Oil Markets, has offered the following comment on the rise:
"After a continuous price decline that lasted more than two weeks, oil prices look like they are finally stabilising today around the US$40 level.
The market has now priced in the bleak demand recovery projections and the supply come-back. We are now at a stage where until things get better at the demand front, prices may swing around the same mark for a while.
But there are also certain market events that stopped the decline today.
The IEA quantified the effect of Hurricane Laura on US production, which cut significant volumes from the country’s expected supply. Harsh weather events in the US cause some unpredictability about its oil production and that’s always good news for prices.
Then there is also the coming OPEC+ meeting. There may have been only few surprises from the alliance in recent months but ahead of such meetings traders traditionally boost prices on anticipation that the group may decide to take new action.
Traders have already priced in the Middle Eastern price cuts and know these hit OPEC where it hurts. There is also anticipation that there may be a reaction to members that have failed to live up to their word and compensate for the cuts they did not make in previous months.
OPEC+ always has the power to reverse market trends with its decisions and now that the next meeting is days away, naturally the market stopped depressing prices and waits for what’s next.
The only thing likely to hit prices again before the meeting is projections on last week’s US crude oil inventory levels.
If stocks rose again, which is not unlikely, that’s another bearish indication for the market. But this time keep an eye on floating storage too as onshore numbers may not give the full picture."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/15092020/oil-prices-rises-in-anticipation-of-the-opec-meeting/
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