All we can do is watch and wait
Tensions between Saudi Arabia and the United Arab Emirates are threatening to scuttle an extension of the current OPEC+ oil production cut target
By ATB Economics 2 December 2020 1 min read
Like everywhere else in the world, Alberta’s economic recovery depends on the path of the coronavirus and when vaccines will finally put the pandemic in the rearview mirror.
As a major oil producer, our recovery also depends on the fate of global oil prices.
And, as with the development of COVID-19 vaccines, all we can do is watch and wait as the members of the OPEC+ cartel decide whether or not they will maintain the production cuts that are keeping a floor under global oil prices.
It might seem like a no-brainer for OPEC+ to continue to shore up the price of the product they produce, but not all members are happy with the agreement and there are signals that it could break apart like it did in March when a falling out between Saudi Arabia and Russia led to a month-long price war.
This time around, tensions between Saudi Arabia and the United Arab Emirates are threatening to scuttle an extension of the current production cut target of 7.7 million barrels per day. Without an extension, the target drops to 5.7 million barrels per day.
Although oil demand has improved since the early days of the pandemic, more supply is the last thing that is needed as the second wave of the virus crashes into economies around the world.
You simply never know with oil prices, but they are likely to fall significantly if the current OPEC+ production cuts are not extended into 2021. With the West Texas Intermediate benchmark languishing in the $40-$50 range, many Alberta companies are struggling just to stay afloat and sustained drop in prices could push them under.
OPEC+ is scheduled to meet on Thursday, December 3. Now we wait.
ANSWER to yesterday's trivia question: Comparing the first 10 months of 2019 to the first 10 months of 2020, which province was the farthest behind where it was last year with regard to the value of building permits? Saskatchewan. Our neighbour to the east was 20.7 per cent behind where it was last year compared to 9.9 per cent in Alberta and 6.0 per cent nationally
Today’s question: When was the last time West Texas Intermediate closed above $50?