Oil prices have been stuck for the past week as investors await the next OPEC meeting decisions. As OPEC meeting rapidly approaches, bullish sentiment in the market has halted with rumors of uncertainty on cuts extension. But the recent oil price rally may well be the addition of “geo-political risk premium”.
Barrel traders in oil markets have pushed the oil above $ 55 levels for the first time in over 2 years. The scarcity of supply, however, does not justify the oil prices at their current level. The shortage could worsen as tension between the biggest two oil players escalates. Strains between Iran and Saudi Arabia have recently escalated as proxy wars between the two ideologically different Muslim nations have come to forefront.
Brent crude futures, the international benchmark for oil prices, were at $62.81 per barrel at 0112 GMT, up 24 cents, or 0.4 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $57.31 a barrel, up 48 cents, or 0.8 percent.
Oil prices are generally well supported by an effort led by the OPEC and a group of non OPEC countries led by Russia to slash output. Hence, all eyes are on the next OPEC meeting which is set to declare its decision on cuts extension.
All members seem to be on board to extend cuts except for Russia. Russian Ministers have repeatedly said that Russia is content with the current BRENT Benchmark prices raising concern for the expected cuts extension from the Russian side.
However, nothing is certain yet but the picture would get clearer on November the 30th when OPEC members meet at the OPEC Secretariat in Vienna, Austria.