International oil benchmark, Brent crude, tumbled on Monday after hitting a record high of $53 ahead of the meeting of the Organisation of the Petroleum Exporting Countries and its allies.
OPEC and its allies, a group known as OPEC+, met on Monday but ended discussions without any agreement on production levels for February. The meeting was adjourned till Tuesday (today).
The market declined despite expectations that OPEC+ would hold off on increasing output in February and optimism over a vaccine-driven economic recovery, according to Reuters.
Brent, against which Nigeria’s oil is priced, rose by 3.6 per cent earlier on Monday to $53.30 a barrel, its highest since March 2020 but fell to $51.24 per barrel as of 8:30pm Nigerian time.
Most OPEC+ officials voiced opposition to increasing oil output from February when they met on Sunday, Reuters quoted three OPEC+ sources as saying.
OPEC+ increased output by 500,000 barrels per day this month but some members have questioned the need to increase more from February due to an upsurge in the COVID-19 pandemic.
The group agreed in December to gradually increase their oil production and to hold monthly meetings starting from January to decide on further production adjustment until the total production increase reaches two million bpd.
OPEC+ producers had been curbing output to support prices and reduce oversupply since January 2017, and cuts a record 9.7 million bpd in mid-2020 as COVID-19 hammered demand for petrol and aviation fuel.
On Sunday, OPEC Secretary-General, Mohammad Barkindo, warned OPEC+ experts of downside risks facing the oil market.
On Monday, Saudi Energy Minister, Prince Abdulaziz bin Salman, said OPEC+ should be vigilant and cautious despite a generally optimistic market environment as demand for fuels remained fragile and the new variant of coronavirus was unpredictable.
“In many parts of the world, where infection rates have increased worryingly, a new wave of lockdowns and restrictions are being put in place, which will inevitably impact the rate of economic recovery in those countries,” he said.
The new variant of coronavirus, reported in Britain last month, is spreading globally and on Monday British Prime Minister Boris Johnson was scheduled to set out tougher lockdown rules.
OPEC’s leader Saudi Arabia has repeatedly suggested a more cautious approach during previous meetings, while the United Arab Emirates and non-OPEC member Russia have said they prefer a speedier increase.
On Monday, Russian Deputy Prime Minister, Alexander Novak, said there were still loads of uncertainties in the oil market and OPEC+ should remain flexible in its decision-making.
“Under the current output terms, surpluses are expected from February until April, before demand recovers from May onwards, so a possible OPEC+ decision to not increase production will keep balances at a manageable level,” said Bjornar Tonhaugen from Rystad Energy.