Oil prices are showing signs of resilience as they tick upward before the next meeting of the Organization of the Petroleum Exporting Countries (OPEC) later this week. After a slight dip in recent days due to the news of the summit’s delay, prices are now bouncing back. West Texas Intermediate, the U.S. benchmark, has seen a 0.9% increase, reaching $75.55 per barrel. Meanwhile, Brent crude, the international standard, has risen by 0.7% to $80.67 per barrel.
Unity Challenges Delay OPEC Meeting
Reports indicate that a lack of consensus on restricting oil output was behind the decision to postpone the OPEC meeting. This underscores the competing interests of member countries. On one hand, they all benefit from higher prices, which can be achieved by collectively reducing output. On the other hand, each country wants to sell as many barrels as possible to maximize revenue.
Weak Global Economy Pressures Oil Prices
In addition to internal disagreements within OPEC, there is growing concern over a weakening global economy, which is putting downward pressure on oil prices. Deutsche Bank recently expressed the strong possibility of a U.S. recession next year, further contributing to market uncertainty. China, the world’s second-largest economy, also continues to grapple with a sluggish recovery after lifting Covid-19 lockdowns a year ago.
Floor Under Oil Prices
Analysts believe that even if OPEC declines to impose further restrictions on output, there is likely to be a floor under oil prices. The United States has announced plans to replenish its strategic reserves by buying oil at around $70 per barrel. Furthermore, other buyers may take advantage of slightly lower prices and enter the market.
Unlikely Collapse in Prices
While concerns surrounding OPEC discussions persist, a complete collapse in oil prices remains a remote possibility. The market continues to show resilience, and despite the challenges, an agreement among OPEC members to manage output levels is still considered the most likely outcome.