Crude oil prices fall as OPEC fails to agree on production cuts
- OPEC failed to reach an agreement about the extension of production reductions
- It warned serious challenges induced by coronavirus are likely to extend into 2021
- Crude oil prices closed over 26% higher in November but trade modestly lower in December
Crude oil prices fell 1.5% on Tuesday after reports emerged that the Organization of the Petroleum Exporting Countries (OPEC) failed to reach an agreement over oil output cuts for 2021.
Fundamental analysis: Talks to resume
OPEC failed to reach an agreement about the extension of production reductions and has voiced its concerns that serious challenges induced by coronavirus are likely to extend into 2021.
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“The shock to the oil industry is massive and its severe impacts will likely reverberate in the years to come,” said Abdelmadjid Attar, president of OPEC and Algeria’s energy minister.
“The pandemic continues to rage with cases soaring in many regions around the world. It continues to affect adversely the global economy and, consequently, the world energy markets, in an unprecedented manner.”
The group has agreed to resume talks on Thursday as the negotiators were struggling to agree on the amount of oil the group should pump in the face of weak demand, according to Reuters.
OPEC was initially supposed to introduce a plan about the next phase of introduction policy on Tuesday.
The latest OPEC agreement suggests that the collective curbs are expected to decrease again to 5.8 million barrels per day from January, however, factors like moderate demand in the Asian market, a second nationwide lockdown in Britain and other European countries have urged officials to ask for an extension in production cuts.
The group estimated oil demand to drop by about 9.8 million BPD in 2020 as the persisting pandemic continues to hurt demand for crude.
Technical analysis: Prices fall
Crude oil prices closed over 26% higher in November but trade modestly lower in the beginning of December. Brent crude was down about 0.65% at $47.56, while U.S. West Texas Intermediate (WTI) lost 1.48% to trade near the $44 mark.
The price action trades nearly unchanged today after printing $43.94 earlier this morning. A major support line is located at $43.80 for investors looking to buy crude oil while key targets for buyers are located above the $50 mark.
OPEC couldn’t come to an agreement on the production cuts, warning that current coronavirus-induced challenges may persist in 2021, sending crude oil prices lower.