Oil Prices Hover Near Year-Highs as OPEC Mulls Output Freeze

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Development of Shayba oil field in Saudi Arabia’s Al-Rub al-Khali desert

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AFP via Getty Images

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Oil prices remained stuck around the $80-a-barrel mark on Thursday as the US administration decided to release 50 million barrels of strategic reserves to cushion the fall in gas prices.

And some officials from the Organization of the Petroleum Exporting Countries (OPEC) warned that reserves releases by major oil-consuming countries would add to the glut forecast in the first half of next year.

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International benchmark Brent crude oil was broadly stable at $81 a barrel on Thursday. Prices dropped to $79 upon news of the US release, but recovered quickly thereafter. West Texas Intermediate was down 0.2% at $78.2 a barrel.

Instead, markets were waiting for an OPEC meeting on December 2, when the organization and its allies – such as Russia – would decide whether to maintain moderate output growth earlier this year.

According to the Wall Street Journal, Saudi Arabia is a major member of OPEC, as well as Russia. consider pause In gradual increases – 400,000 barrels per month – to help prevent a drop in prices, if production actually outpaces demand at some point next year.

OPEC is divided on this matter – some members, such as the United Arab Emirates and Kuwait, are eager to increase production.

What complicates matters for both oil producers and consumers is the continued uncertainty over the economic impact of another wave of the pandemic – as is currently being seen in Europe.

If this leads to more severe restrictions or lockdowns than are currently envisioned, the impact on economic activity could be significant, reducing demand for oil. That is the cloud that OPEC will have to try to see at its meeting next week.

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