Commodity Blog

Futures for crude oil continued to sink, falling more than 1% today. The group known as the OPEC+, which consists of the Organization of Petroleum Exporting Countries, Russia, and several other oil-producing countries, should have held a meeting today. The OPEC+ has an agreement to reduce oil production by 7.7 million barrels per day to buoy prices. The group was earlier planning to ease the output cuts but the second wave of the COVID-19 pandemic made such an action ill-advised. Members of the agreement should have met today to discuss whether they should extend the cuts. But in a surprise move, the meeting was delayed till Thursday.

Experts speculate that such a decision was made because the preliminary talks on Monday failed to fix the disagreement between the members of the deal. Saudi Arabia, the de facto leader of the OPEC, favors extending the cuts for three months. Russia, on the other hand, wants to start gradually increasing production in January.

Russia has already caused a rift in the agreement back in March, ramping up production, which prompted Saudi Arabia to do the same. That was an ill-timed decision as it coincided with the global COVID-19 pandemic, causing oil prices to plummet.

Some market analysts think that there is also a technical side to the decline. They pointed out that the huge rally of crude oil in November made it overbought, and a pullback was in order. And usually, the bigger the move — the bigger the correction.

Futures for delivery of WTI crude oil in January sank by $0.92 (2.03%) to $44.42 per barrel as of 19:08 GMT on NYMEX today. Brent crude for delivery in February declined by $0.62 (1.29%) to $47.26 per barrel on ICE.

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