FX.co ★ Cost of oil decline while anxiously waiting for OPEC+ meeting

Oil prices around the world recorded a significant decline on Tuesday morning, as it anxiously waits for the OPEC+ meeting. The market participants are worried that the alliance may ease restrictions on the extraction of crude oil.

In this context, the price of May futures for Brent crude oil mixture fell by 1.1%, that is, to $ 62.99, while April futures for WTI also did by 1.19%, namely to $ 59.92 per barrel.

Investors are nervously anticipating the OPEC+ meeting scheduled on March 3 and 4. Market participants are concerned that members of the alliance may stop providing the market with the support that they have provided when this year began, in the form of reducing the supply.

At the same time another negative factor for oil prices was the publication of the White House that the United States reserves the right to impose sanctions against the Crown Prince of Saudi Arabia, Mohammed bin Salman.

There is no doubt that this fact has brought considerable tension to relations between America and the Kingdom before the long-awaited OPEC meeting. In such a case, Saudi Arabia may react to the US decision by increasing production, which will negatively affect American oil producers.

According to experts, it is very likely that the reaction of the Arabian state will be aimed at influencing the economy of President Biden, in terms of limiting oil production, which will lead to its price growth. If so, the oil companies in the US may fail to immediately respond to such an action.

It should be recalled that oil's price was previously rising amid expectations of an increase in demand due to the high rates of vaccination against COVID-19 and the adoption of a stimulus package.

Last weekend, the US House of Representatives approved a $1.9 trillion state aid package proposed by the administration of President Joe Biden. The bill was then passed to the Senate for final decision.

The OPEC+ decision to limit supply is another supporting factor for oil. Here, the key player was Saudi Arabia, which voluntarily reduced production in February-March by 1 million barrels per day.

However, considering today's significant price growth in oil, the alliance may weaken the measures taken the day before. At the same time, there is a possibility that Saudi Arabia will increase production by the previously reduced 1 million barrels per day.