By Lucas Ajanaku
Oil on Monday went up on the meeting of the non-member countries of the Organisation of Petroleum Exporting Countries (OPEC+).
February West Texas Intermediate (WTI) futures fell 22cts to trade $48.33, and ICE March Brent futures rose 28cts to trade just above $52 per barrel.
Nigeria, the sixth largest oil producer in OPEC, based its 2021 budget on oil benchmark of $40 per barrel up from $30 it was in 2020, when the country had to revise the 2020 budget oil benchmark from $57 per barrel to $30. Exchange rate was also fixed at N379/$1 while production output was also revised from approximately 2.1 million barrels to 1.86 million per day.
Major economies in the West are seen to have missed their targets for widespread inoculations against COVID-19 at the start of 2021, with France — one of the hardest hit countries by the pandemic, administering only a few hundred doses so far which compares with tens of thousands in Germany and nearly a million in the United Kingdom. In the U.S., the lack of a unified federal approach towards an immunisation campaign created confusion and supply bottlenecks in some states, prompting criticism from top health officials and politicians on both sides of the isle.
OPEC+ oil ministers are unlikely to shrug off these developments, according to some analysts, with the 23-nation producer group seen forgoing a 500,000 bpd production increase for February when they meet today. OPEC+ is maintaining cuts at 7.2 million bpd, with a 500,000 bpd output hike taking place on January 1.
Russia was the only member of the coalition that has publicly called for production increases in February, arguing that the recent price rally warranted more supplies on the market.
“To restore our output, that we’ve reduced a lot, the price range of $45 to $55 a barrel is the most optimal. Otherwise we’ll never restore production, others will restore it,” Deputy Prime Minister Alexander Novak told reporters in Moscow.
To Novak’s point, countries like Libya, Iran and the U.S. have been bringing back production and exports, complicating efforts to rebalance the fragile market.
In what can be seen as some external support for crude, the U.S. dollar continued its decline, falling to the lowest level in 2-1/2 years at 89.425 against the basket of global currencies.
The greenback’s decline happens as markets are looking forward to this week’s run-offs for the two Senate seats in Georgia which will prove pivotal for the balance of power in the U.S. Congress.
Democrats will need to win both contests to obtain effective control of the upper chamber and enact their stimulus policies that markets want.
The United States has administered nearly three million doses in the final weeks of 2020, according the figures published by the Centers of the Disease Control and Prevention versus the 20 million targeted by the Federal Government.
Meanwhile, China has vaccinated over 4.5 million people and Israel has become the front-runner in the number of doses administered per 100 people.
In addition, a new strain of the virus found in the UK and South Africa combined with family gatherings during the holiday season are expected to lead to a further rise in COVID-19 cases that pressure hospital capacity, with even Japan and Korea now considering tightening restrictions.
The smooth rollout of the COVID-19 vaccines is seen critical for the fast recovery in global oil demand this year as a persistent surge in hospitalisations and virus-related deaths are likely to dampen mobility and air travel after a pickup in activity last month.