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Oil Prices Tumble to One-Year Low, Begins Recovery After Rumoured Planned OPEC Cut

OPEC and allies including Russia, a group known as OPEC+, will meet on December 4, to decide the next line of action.

Oil prices on Monday tumbled to the lowest level since December on the back of rising unrest in China, the world’s biggest crude importer and consumer, clouding the outlook for energy demand.

West Texas Intermediate sank toward $74 a barrel following three weeks of losses, while Brent traded around $81 earlier in the day.

However, it turned positive later in the day, recovering after falling to close to the lowest this year, as rumours of an Organisation of Petroleum Exporting Countries (OPEC) production cut offset concerns about street protests against strict COVID-19 curbs in China.

At the time of this report, WTI crude had risen 48 cents, or 0.1 per cent, to $76.76 , after touching its lowest since December 22, at $73.60.

Also, Brent crude, Nigeria’s oil benchmark, rose 14 cents, or 0.2 per cent, to trade at $83.77 a barrel having slumped more than 3 per cent to $80.61 earlier in the session for its lowest since January 4.

Both benchmarks, which hit 10-month lows last week, have posted three consecutive weekly declines, Reuters reported.

“The word on the street is there’s rumour that OPEC+ is already starting to float the idea of a production cut on Sunday,” said Matt Smith, lead oil analyst at Kpler. “That’s helped reverse losses that were caused overnight by Chinese protests,” he added.

OPEC and allies including Russia, a group known as OPEC+, will meet on December 4, to decide the next line of action, but in October, the group agreed to reduce its output target by 2 million barrels per day through 2023.

China has stuck with President Xi Jinping’s zero-COVID policy even as much of the world has lifted most restrictions, although recent events have now shown that the people are getting tired of the lockdowns.

 Protests over harsh anti-virus curbs erupted across the world’s largest crude importer over the weekend, including demonstrations in Beijing and Shanghai, spurring a broad sell-off in commodities as the week opened. The rare show of defiance is raising the threat of a government crackdown.

The unrest is coming after a sharp pullback in the oil market as the risk of a slowdown in China looms and the European Union floated a price cap on Russian crude that looks set to have minimal impact on trade.

 Speculators have been forced to markedly reduce bullish bets, posting the sixth-largest reduction in net-long positions on record for Brent last week.

In Nigeria, the federal government continues to battle to increase production and meet its OPEC allocation of roughly 1.8 million barrels per day, although the country can barely drill 1 million bpd.

Emmanuel Addeh in Abuja