By Adedapo Adesanya
Crude oil prices were pointing down on Tuesday as concerns over mounting supply returned after leading producers delayed talks on 2021 output policy that could extend cuts amid weakened demand.
This weakened the price of the Brent crude by 24 cents or 0.51 per cent to sell at $47.18 per barrel and battered the price of the West Texas Intermediate (WTI) by 26 cents or 0.58 per cent to $44.29 per barrel.
After the Organisation of the Petroleum Exporting Countries (OPEC) ended its meeting on Monday without a resolution on its production plans for 2021, it delayed a meeting set for Tuesday until later in the week to allow more time for deliberations of the sticky subject.
This development puts the cartel at a serious situation as a decision not to agree might prove very costly for the commodity, which hit an eight-month high last week.
The fall in price of oil on Tuesday gives a preview of what will likely happen to prices should the deal fails.
Both contracts surged around 27 per cent last month after COVID-19 vaccine developments raised hopes of an economic recovery that could boost fuel demand.
However, this might backtrack due to delayed talks on output policy for next year until Thursday as key players still disagreed on how much oil they should pump amid weak demand.
It was reportedly discussed whether to increase production in January as planned or maintain the cuts that have helped create a rally in oil prices. While some see the market as still too fragile to accept more barrels, others are keen to ramp up production and make the most of rising prices.
The group is due to ease current production cuts by 2 million barrels per day from January, but with demand still under pressure from the pandemic, OPEC+ was considering extending current cuts into the first three months of next year.
Under the current agreement, the collective cuts are scheduled to taper again to 5.8 million barrels per day from January, but demand improvement from Asia, new lockdowns in Europe and the worrying case of the virus in the United States have prompted some ministers to advocate an extension. For those who are against this, it is based on their policies which are dependent on oil prices.
Yesterday, the price of oil was depressed by a report of a build in crude oil inventories of 4.146 million barrels for the week ending November 27 in the US by the American Petroleum Institute (API).
Analysts had predicted an inventory draw of 2.358 million barrels for the week and this will be verified by the more accurate data from the Energy Information Administration (EIA) later on Wednesday.