Brent crude oil rose to its highest level since March before the OPEC+ decision

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The price of Brent crude oil rose above $70 a barrel as OPEC and its allies will decide whether to release more oil to the tightening oil market or postpone production due to the ongoing uncertainty associated with the pandemic.

The international oil benchmark price rose by more than 2% to US$70.69 per barrel in London on Tuesday morning, the highest level since March. Subsequently, OPEC+ oil producers led by Saudi Arabia and Russia will hold a meeting later in the day.

OPEC representatives and the energy agency pointed out that the government’s implementation of the lockdown and travel ban last year led to a sharp decline in consumption, which is expected to reverse later in 2021.

OPEC Secretary-General Mohamed Sanussi Barkindo said on Monday: “There are many changes in the factors affecting the global oil market, such as the speed of change during the pandemic.”

Several OPEC representatives stated that they expect the ministers to advance their previously agreed plan at their virtual meeting to slowly release more oil to the market starting in July, totaling 2 million barrels per day since May.

After a meeting with technical analysts in producing countries, it was determined that oil inventories at the end of next month would be lower than the 2015-2019 average, paving the way for higher production.

Producers meet monthly to decide on oil policy. It is not yet clear what they plan to do after July, but the organization may pay close attention to rising inflation concerns and the progress of the economy’s recovery from the pandemic.

Last year, OPEC and Russia issued a record reduction of 9.7mb/d. With the resumption of travel and the opening of the city after months of lockdown, they have begun to gradually relax. As of July, the limit will remain slightly below 6 million barrels per day.

“The market is now facing the exact opposite dilemma in April 2020. Instead of a downward spiral of demand shock… Rystad Energy’s Louise Dickson said that producers are now facing an equally difficult task. , That is, to restore enough supply to meet the rapidly increasing demand for oil.

Nevertheless, uncertainty still exists. As a major oil consumer, India is in the midst of a new wave of more serious viruses. If an agreement is reached with the United States to lift sanctions, all eyes will be on Iranian oil returning to the market.

Tamas Varga, an analyst at the oil brokerage firm PVM, said the group must be wary of investors’ reaction to rising inflation and the ability of the market to resist increased supply.

“The general concern is that as the economy overheats, higher producer and consumer prices will force the central bank to reduce monetary stimulus measures and eventually raise interest rates,” Varga said.

“The most likely outcome is to keep the agreed collective production level unchanged at 38.1 mb/d in July, August and possibly September, to see if the market can absorb the additional Iranian barrels.”

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