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29 February 2024

Oil prices close in on $36 on talk of emergency Opec meeting

By Vicky Kapur

Global oil prices have seen renewed impetus with prices surging back to near $36 per barrel as Opec members agree to an emergency meeting to discuss the “equilibrium” price of a barrel.

According to a Bloomberg report, six Opec member states and two non-members have said they’ll consider attending an emergency meeting if one is called, citing Opec member Venezuela’s oil ministry.

The comments by the Venezuelan oil ministry came yesterday after the country’s Oil Minister Eulogio Del Pino held talks in Iran.

“Del Pino said that the Venezuelan initiative has been well received and in addition to Iran, countries such as Iraq, Algeria, Nigeria and Ecuador, Opec members, as well as non-Opec nations Russia and Oman, have said they would attend the meeting, if convened,” according to the statement carried on the oil ministry’s website.

Venezuela’s Del Pino is on a tour of oil producing nations. After Russia and Iran, he is planning to visit Qatar, Iran and Saudi Arabia, the world’s largest oil exporter.

“The purpose of this tour is to talk directly with the ministers, to listen to their opinions and try to reach consensus. The idea is not just simply to meet but for the countries to attend the meeting with the intention to reach an agreement,” he said in the statement.

Del Pino said that Venezuela believes there should be an equilibrium price on the world market to stabilise and plan for the investments needed to sustain production. “The current prices fall below this equilibrium point and that leads to speculation and market instability,” he said.

The price of a barrel of Brent crude saw an immediate spike to near $36-levels, and it was trading at $35.27 at 9am UAE time on Thursday.

A barrel of West Texas Intermediate (WTI), on the other hand, stood at $32.56 at the same time.

Last week, global oil prices rose to a three-week high, surging by as much as 30 per cent from 12-year lows hit during the last week of January as speculation rose about a deal between the major Opec and non-Opec oil exporters to slash production.

As several market watchers have pointed out, oil is primarily facing an oversupply issue rather than a demand issue, with no agreement (so far) between Opec and non-Opec members on if and how much to curtail production by.

Any agreement on limiting oil production will be hugely positive for global oil prices, which are being hammered by a glut in the market.

Weaker demand is only adding fuel to the proverbial fire, with the current Opec oil production at 32.60 million barrels per day (bpd), its highest in years. This is more than 1mbpd in excess of the demand, leading to oil prices dropping by more than two-thirds in a supply-sensitive market.

The oil market rallied for four straight sessions last week after a renewed call from the Organisation of the Petroleum Exporting Countries (Opec) for joint efforts with rival producers to cut supply triggered commends showing Russia’s eagerness to strike a production deal with the oil organisation, something it had been refusing to do for 15 years.

(Image via Shutterstock)