Oil prices fall ahead of Opec meeting

London — Oil fell on Monday ahead of a meeting by Opec and its allies which may determine whether a recent rally in prices amid supply shocks and a recovery from the Covid-19 pandemic will be sustained.

Brent crude was down 37 cents or 0.5% at $78.91 a barrel by 08.50am GMT. It rose 1.5% last week, its fourth weekly gain in a row. US oil dropped by 39 cents or 0.5% to $75.49, after gaining for the past six weeks.

Oil prices have risen due to the supply disruptions and a rise in global demand, pushing Brent last week above $80 to a near three-year high.

“The speed with which oil prices have risen this year has slowed considerably but it would be too early or premature to write off further strength. Oil demand is holding up well and supply might have difficulties to catch up,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

Opec+, which groups oil cartel Opec and allies including Russia, is facing pressure from some countries to produce more to help lower prices as demand has recovered faster than expected in certain parts of the world.

Opec+ agreed in July to boost output by 400,000 barrels a day (bpd) every month until at least April 2022 to phase out 5.8-million bpd of existing cuts. Four Opec+ sources told Reuters recently that producers were considering adding more than that deal envisaged.

The earliest any increase would take place would be November since the previous Opec+ meeting decided October volumes.

The oil price rally has also been fuelled by an even bigger increase in gas prices that have spiked 300% and are trading about $200 a barrel in comparable terms, prompting switching to fuel oil and other crude products to generate electricity and for other industrial needs.

“The uneven nature of the post-pandemic recovery will keep demand-side uncertainties in play, giving rise to oil price volatility,” Fitch Solutions said in a note.

Reuters