Crude oil prices dropped on Monday morning at London’s trading session, as oil traders placed their focus on an OPEC technical meeting scheduled to hold on Wednesday. The meeting is expected to recommend an easing in the curb on oil production that has helped rally crude oil prices in recent months.
Brent Crude lost about 0.62% to trade at $42.94 a barrel, at 6.05 am Nigerian time, also the American benchmark for crude, WTI, lost about 0.72% to trade at $40.26.
Crude oil prices remained relatively unchanged in the previous week as the resurgence of COVID-19 caseloads soared in the world’s largest oil-consuming economy, and the plan to impose travel restrictions in some global economies. These factors could most likely trigger a decline in the demand for oil.
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Quick Fact: Brent crude is the leading global benchmark for Atlantic basin crude oil. The international benchmark is used to set the price of about two-thirds of the world’s traded crude oil including Nigeria’s crude.
The importance of crude can’t be ignored; it is used mainly in fueling aircraft, vehicles, and trucks that facilitate economic lifestyles and activities in the modern world. Derivatives from refined crude are used in the production of polymers, as well as the production of waxes, tars asphalts, and lubricants.
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Stephen Innes, Chief Global Market Strategist at AxiCorp in a note to Nairametrics explained the macros, which oil traders are presently monitoring. He said:
“The recent surge in coronavirus infection numbers in the US and elsewhere have brought demand risk back into focus.
“The planned easing of OPEC+ production cuts next month after a one-month extension of the initial phase of the production cut plan and a potential rebound in US production could add pressure on the supply side of the equation.
“And factor in Libya lifting the force majeure, it adds another unwanted level of supply-side uncertainty at an extremely critical point in the oil price recovery phase.
“While the evidence suggests we are past the trough for oil and that supply and demand are rebalancing, near-term headwinds remain as the short-term fundamentals are about as muddy as possible.”
However, crude oil prices rallied more than 2% on Friday after an upward forecast by the IEA in its 2020 oil demand by 400,000 barrels per day.