The Daily Dose; OPEC consensus overshadows World Bank pessimism

-WTI says hello to $50 per barrel

-World Bank warns of lingering economic pain from the pandemic

Crude oil prices shot out of a cannon during the Tuesday session after parties to OPEC curtailments agreed to stand pat on production levels. It did, however, seem to take some muscle from Saudi Arabia, which once again pledged to do more than necessary to keep the market in check. The market largely ignored, however, the cautious outlook from the World Bank, which said the strains from the pandemic would be long lasting.

West Texas Intermediate made its debut at $50 per barrel on Tuesday, skyrocketing some 5.2% in the afternoon session. Brent crude oil was up 2.3% as of 2:10 p.m. ET to hit $53.77.

Russia and Kazakhstan during the weekend pressed for another 500,000 barrel per day allotment in February, but that was eventually shouted down after Monday’s decision-making meetings were delayed by another day. By Tuesday, the two countries had a compromise arrangement in hand that gave them another 75,000 bpd total to play with in February. According to energy reporting agency Argus, the concession was made because of the increase in domestic consumption during the cold winter months.

But it was Saudi Arabia that came to the rescue with an agreement to trim 1 million bpd from its output in February and March that brought oil prices higher during the Tuesday session. And perhaps still reeling from last year’s price war, it seems Russia may have received an earful in between sessions.

“[Saudi Arabia’s voluntary cut] will help to faster stabilize the oil market,” Russia’s deputy prime minister Alexander Novak said.

The market runs the risk of getting overheated, however. The World Bank on Tuesday said the global economy would recover this year, but likely won’t reach pre-pandemic levels any time soon.

“Although the global economy is growing again after a 4.3% contraction in 2020, the pandemic has caused a heavy toll of deaths and illness, plunged millions into poverty, and may depress economic activity and incomes for a prolonged period,” the report read.

That should serve as a warning to the investors that continue to bet on a utopian future. While vaccine developments are promising, the pace of inoculations is slow. The bank added that it’s largely Chinese growth that drags the rest of the world with it. The U.S. economy is expected to expand by 3.6% in there, not enough to offset the decline in GDP from 2020.

“While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges—in public health, debt management, budget policies, central banking and structural reforms—as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth,” said World Bank Group President David Malpass.


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