Today marks the start of the OPEC (Organization of the Petroleum Exporting Countries) meeting, and we already know that there is a disagreement between members. At an informal chat that took place yesterday, a small group of ministers did not reach a consensus regarding the output hike in January.
The crude oil price traded with a bid tone for the entire month of November so far. It rose from as low as $33 to as high as $46, mostly fueled by the promising vaccines against the COVID-19 pandemic that were announced in November.
Virtual OPEC Meeting
The 180th meeting of the OPEC conference will start at 02:00 PM Vienna, Austria, time. Due to the restrictions generated by the pandemic, this will be a virtual meeting.
Today’s discussion will be followed tomorrow by a full ministerial OPEC+ gathering, meaning that other countries, not members of the cartel, will join the discussions (e.g., Russia). In other words, if there is a time when oil traders should closely watch the crude oil price, this is the time.
With Europe in lockdown mode, many believed that the demand for oil would decline during the winter months. However, mobility indexes show that the road fuel demand bottomed out around November 15th and has recovered ever since. It seems that the second round or lockdowns did not have a similar impact on the demand for oil because they are not that severe as in March-April this year.
Moving forward, the entire world waits to see what happens to the vaccination campaign scheduled to start as early as December. The expectations are that when the western world opens fully, the demand for jet fuel, petrol and diesel will be one of the highest ever seen. Moreover, it will likely last longer.
As such, OPEC and friends will likely use this week’s meetings to find out what is the right balance between supply and demand for the months ahead. For instance, the number of passengers going through United States airports reached last week the highest since the COVID-19 pandemic started. Also, the drop in passenger flow improved as well, in another promising sign of a quick bounce back to normality after vaccination starts.
The crude oil price found stiff resistance around the $40 area. A clear break above $50 will likely bring more strength, but caution is needed until more news comes about FDA approval of a possible vaccine.