Vaccine hopes give oil price a boost this week but all eyes on OPEC meetings

The headline news about the effectiveness of various vaccines is boosting global market sentiment. The oil price continued to rise most of this week, but trading was a bit lower on Friday. On this Thanksgiving weekend, Brent crude was above US$48 with West Texas Intermediate (WTI) holding above US$45 a barrel. The vaccine results are encouraging, with talk of 90% effectiveness in trials, but mass production has not begun. Deployment will take time and despite the holiday season, travel plans have been curtailed. Moderate activity Many senior government leaders are urging people not to travel unless absolutely essential, but the airports are reporting a return to moderate activity. The global economy is a long way from full recovery and this will keep oil demand low for months to come. Ministers from OPEC and OPEC+ will be checking their technical connections for the upcoming meetings next Monday and Tuesday. An early report from Reuters says that ministers will hold informal talks on Saturday in advance of the meeting with Saudi Arabia and Russia online. The group is scheduled to ease the current oil output adjustment by 2 million barrels from January. That would effectively mean more oil on the market and at a time of uncertain demand, analysts are not sure if that’s the right decision. The CEO of Crystol Energy, Carole Nakhle says she does not expect OPEC to add more oil to the global mix when they meet. She says that OPEC’s 2021 demand outlook is more conservative than others, adding "there’s more oil coming from Libya and record inventories that have been built up". A second wave of the pandemic will worry the market but the oil price rise in recent weeks and the continued rise of stockpiles in the US will also be topics for consideration. In a note from JP Morgan to clients, the bank says it expects OPEC to delay any production increase decision until the spring meeting in 2021. Fresh discoveries in UAE Fresh discoveries of hydrocarbons in Abu Dhabi will make the UAE an even bigger oil producer as the Abu Dhabi National Oil Company announced the find this week. Its estimated there’s capacity of 22 billion barrels of unconventional oil reserves and 2 billion barrels of conventional oil. The recoverable reserves for Abu Dhabi places it as the sixth biggest producer in the world with 107 billion barrels. A statement from ADNOC says this level of production ranks the country "alongside the most prolific North American shale oil plays". The UAE intends to increase output capacity to 5 million barrels a day by 2030, but the country will maintain production in accordance with OPEC’s production guidelines. So all eyes will be on the upcoming OPEC+ agreement this week. Balancing the market while maintaining price stability will no doubt be the focus of the meetings as ministers examine the data and count the barrels.