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Oil price spikes on OPEC announcement

Oil Spikes After OPEC “Announces Worst Is Over”

Thursday saw a welcome note of optimism for oil markets after OPEC Secretary-General Mohammad Barkindo declared that the “worst is over” for global oil markets. Crude futures rose by over 3% on the news settling at $41.22 at the close.

The comments came as OPEC announced its annual World Oil Outlook. Secretary-General Mohammad Barkindo added that OPEC would continue with its oil market supply management.

“The Worst Is Over For The Oil Market”

OPEC is confident the oil recovery will continue into the second half of the year as countries worldwide ease COVID lockdowns and demand for oil increases. The measures put in place to combat the pandemic had seen an unprecedented drop in demand, and by extension, the price of oil.

The forecast isn’t all good, though, as OPEC expressed its concerns over a possible offset in demand due to a continued move to home-based workers and online meetings instead of the historical commuting of the workforce.

Saudi energy minister Prince Abdulaziz bin Salman recently gave a clear signal pointing to a hardening in their reaction to the continued fall in oil prices with warnings to short-sellers not to bet on further reductions in oil prices.

While global inventories remain above 220 million barrels, OPEC was optimistic about a positive correction toward the end of the year.

“The market will remain very healthy, heading into Q4 2020.”

Condemnation of OPEC members pumping more than their agreed quotas was vehement, with the United Arab Emirates singled out as the worst offender. Overproduction is seen as one of the primary drivers of the price falls, as demand has not kept up with the supply.

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