Oil Market Spoiled by OPEC+

The oil market has frequently been spoiled by OPEC+, as the alliance has stepped in several times since the start of the pandemic to save prices when the demand outlook was worsening.

That’s what Rystad Energy’s head of oil markets, Bjornar Tonhaugen, said in a statement sent to Rigzone on Tuesday, adding that the group’s technical committee is now looking at India and other countries with concern.

“The market boosted prices today as it expects that OPEC+ will address the developments in India and, since the country is among its major clients, it may reconsider its output policy,” Tonhaugen said.

“Traders do not want to miss out on a potential bullish OPEC+ meeting so a limited optimism is reflected in prices. Should OPEC+ turn a blind eye to India though, the gains may quickly evaporate,” he added.

Tonhaugen noted that news from India set off a loud alarm on trader floors this week and that oil prices have taken a hit on expectations that oil demand will crash in a country that is among the commodity’s largest consumers globally.

The Rystad Energy representative said Covid-19 infections in India are already out of control and that the country’s healthcare system is insufficient to handle the population’s needs, therefore things will likely get much worse before they get better, with severe consequences for all commodities including oil.

The 16th OPEC and non-OPEC Ministerial Meeting is due to be held via videoconference on Wednesday. In a statement posted on OPEC’s twitter account on Tuesday, the organization’s secretary general noted that the global economy continues to show positive signals of recovery but also underscored the need to continue with vigilance as uncertainties remain going forward.

India has seen more than 300,000 confirmed cases of Covid-19, and more than 2,000 deaths, every day since April 22, according to the latest information from the World Health Organization (WHO). The country has administered more than 130 million vaccine doses as of April 20, WHO’s latest data shows.

To contact the author, email andreas.exarheas@rigzone.com