After rising at the end of last week, oil price saw a drop in Monday trading, with WTI light crude oil January contract lost -1.08% to settle at $45.76, while Brent future contracts declined by -0.93% to close the session at $48.79.
Because of some adverse news and the rising number of coronavirus cases in a number of countries, questions have come to the fore about oil’s fate. In particular, restrictive measures have, been tightened in the United States, Germany and South Korea. At the same time, there has been a decline in optimism about the imminent arrival of vaccines: the effect of vaccination will be evident no sooner than six months, until then the pandemic factor will continue to have a negative impact on demand.
In these circumstances, the expected increase in OPEC+ countries’ oil production from January 2021 onwards could contribute to a short-term increase in the oil market imbalance.
The participating countries will increase production by 500 thousand barrels a day from next month. OPEC+ will then meet to decide quotas for the coming month on a monthly basis. The next meeting of the group is expected to be on January 4. At the same time due to the need to fund budgetary expenses that have dramatically risen due to the coronavirus pandemic, many alliance members are highly interested in more productions.
A large rise in oil production in Libya, which could bring additional pressure on oil prices in the short term, is also worth noting. The country currently produces around 1.20-1.25 million barrels a day, although monetary growth in exports last month increased by 204 percent m / m, to $700.4 million.
As for oil market figures, data on crude oil reserves in the U.S. will be published by the American Petroleum Institute (API) on Tuesday. Analysts expect a drop in inventories by the end of last week after a rise of 4.1 million barrels a week earlier, according to a Reuters survey.