Oil prices rose to their nine months high on Friday as the OPEC group came to an agreement on production cuts last week. WTI rose by 1.4 percent to $46.26 per barrel whereas Brent moved ahead increasing by 1.1 percent to $49.25 on the day.
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Due to the rising number of cases of coronavirus infection, global markets are witnessing a slight weakening of risk appetite amid reports of tougher restrictive measures in the United States (California), Germany (Bavaria) and South Korea. The pandemic factor would also have a negative effect on the world economy, provided that the process of vaccinating the population could take quite a long time.
The market participants’ worries about the potential overproduction of oil came to the fore in this respect. Thus from January 2021 onwards, OPEC+ countries would increase production by 500,000 barrels per day which may contribute to market over-supply and put pressure on oil prices.
Moreover, it became clear on Sunday that if sanctions are relaxed, Iran is planning to restore oil exports to more than 2 million barrels per day. With Joe Biden coming to power in the United States, Iranian President Hassan Rouhani expects a return to the nuclear deal and has instructed mining companies to plan to increase production over the next three months. Iran has not participated in the OPEC+ deal and is not bound by production restrictions. However, the chances for a US-Iran nuclear deal remain unclear because the US President Donald Trump continue to insist on his victory and maintains that he will not resign. At the same time, he still has the ability to retain the presidential seat, considering the peculiarities of the electoral system in the United States.
As for oil market figures, data from the American oil service firm Baker Hughes on the number of active drilling rigs in the United States became public on Friday. The indicator increased by 5 units to 246 units in the week ending December 4, which was the highest value since May of this year. Thus, oil production is also recovering in the United States, which may lead to a decrease in the price of ‘black gold’ if the external environment worsens.
