Oil prices plunge over OPEC+ drama

Oil prices drifted lower at the second trading session of the year amid reports revealing OPEC+ members are disconnected as regards to February crude oil output quota.

What you must know: At the time of writing this report, Brent oil futures lost about 0.70% to trade at $50.70 a barrel, and West Texas Intermediate, futures were down more than 0.50% to trade at $47.55 a barrel, thereby giving up earlier gains sighted in Tuesday’s early trades.

Both major benchmarks lost more than 1% during the last trading session on the account that the oil cartel group was forced to extended Monday’s Joint Ministerial Monitoring Committee, as its members failed to agree to reach a compromise on February’s oil output levels.

Also, oil traders had their minds distorted as fuel demand worries also continue to remain on major headlines on the bias that a number of global COVID-19 cases continue to rise and more nations introduce restrictive measures.

Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics gave an in-depth analysis of the fundamentals pushing oil prices lower and highlighted the mutant COVID-19 strain causing havoc in leading economies;

“The oil market toppled head over heels with broader markets as the sum of all fear for oil market concerns centers around lockdown consternations. All the while, OPEC was doing their best to hold prices in check emphasizing the need for continued cooperation and vigilance in the face of the uncertain outlook.

“The most worrying aspect for oil market concerns is the case of a brave new year giving way to the same old fear as the re-imposition of worldwide lockdown to defend against the coronavirus’s mutant strain will pose the greatest near-term risk on the path back to oil demand normalcy.”

What to expect: Far more important for crude oil traders will be news flow relating to the COVID-19 vaccine rollout, stimulus measures being considered by various governments, and how quickly the world can get back on the path to normal oil demand levels via the vaccine rollouts.