2. Oil climbs but struggles to reach escape velocity
COVID-19's persistence is still weighing down oil prices, but the market had a rosy week by 2020 standards, capped by OPEC+'s new pressure on some members to stop cheating on their production limits.
Driving the news: Crude prices jumped Thursday after the meeting of OPEC+ (that is, OPEC, Russia and allied producers) addressed noncompliance by the UAE and some others.
- "These false promises not only discredit those who make them, but also weaken our collective goal," Saudi Energy Minister Prince Abdulaziz bin Salman said at the virtual meeting.
- A joint communique flagged the "critical importance of adhering to full conformity and compensating overproduced volumes as soon as possible."
Why it matters: The renewed commitment to the group's deal to withhold 7.7 million barrels per day through the end of the year (before tapering) helped boost prices of Brent crude and WTI, the U.S. benchmark.
- Members also floated the possibility of new steps to tighten the market, per several reports. The joint statement also emphasized the need to weigh "further necessary measures when needed."
Where it stands: Prices ticked back down slightly this morning. They're still well below what key producing nations need for their domestic finances, and also too low to end the jeopardy for U.S. producers (more on that below).
What they're saying: "Although no amendments to the current supply-cut deal have been proposed by OPEC+ ... the producers group gave the impression that it does not sweep troubles under the carpet," Rystad Energy's Bjornar Tonhaugen said in a note.
Yes, but: The trajectory of the pandemic, which has hammered oil demand, is still what matters most.
- VI Investment Corp. analyst Will Sungchil Yun tells Bloomberg that while the meeting helped prices, "this may be temporary since we need a strong and consistent signal that a real demand recovery is actually happening.”
Go deeper: Saudis turn up heat on OPEC+ laggards (International Oil Daily)