WTI Oil futures (CL) are down 1.6% today during early hours trading, dipping below $45 per barrel, as OPEC countries work to find common ground on how to proceed. Brent Oil (EB) is down 1.9% hitting the $47 range.
During Sunday’s OPEC virtual meeting, member countries discussed the new economic landscape which is making it increasingly difficult to raise the price of Oil. While China’s demand for Oil has returned along with their economic growth, Europe is busy managing a surge in Coronavirus cases by imposing a lockdown and other restrictions that have an impact on Oil consumption.
Pressure on OPEC member states is high. China has increased their own Oil production to compete with the US for the world’s largest producer. At the same time, both Libya and North Sea producers have been extracting better-quality light-sweet crude, which is easier to refine into fuels. This is in comparison to the OPEC nations “heavy-sour” sulfurous crude, which is more difficult to refine and considered a lower quality Oil.
Future Demand for Oil
While both Brent and WTI have dipped during this morning’s trading, futures are still poised to close out November at the highest value since March 6th of this year.
While American and European demand is still down over 30% since March, Asian markets such as China, India, Japan, and South Korea have recovered overall to only 10% below pre-pandemic levels.
With vaccines nearing closer to government approvals and the ability for global economics to look beyond lockdowns, it remains to be seen if OPEC will reduce production or prepare for higher demand.