Oil recoups losses as Russia backs Opec+ efforts

The global alliance of oil producers will meet on March 5 and 6 in Vienna

Venezuela's Oil Minister Manuel Quevedo, Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman Al-Saud and Russia's Energy Minister Alexander Novak are seen at the beginning of an OPEC and NON-OPEC meeting in Vienna, Austria December 6, 2019. REUTERS/Leonhard Foeger

Oil prices recovered their losses at the start of trading on Monday amid anticipation of Opec+ action this week after Moscow indicated that it will support the group's pact.

Brent, the most widely-used benchmark was up 2 per cent and trading at $50.66 per barrel at 2.12pm UAE time, while West Texas Intermediate was up 1.7 per cent at $45.55 per barrel.

The benchmarks recovered from their worst week since 2008, where Brent collapsed by 13 per cent to settle at $50.52 per barrel, while WTI tumbled 16 per cent to close at $44.76 per barrel due to fears of weakening demand, particularly from the world's biggest importer, China. Both benchmarks haven't hit such low prices since mid-2017. Global stocks also suffered their worst week since the global financial crisis in 2008.

Oil's recovery came following statements by Russian President Vladimir Putin that the country, the world's largest sovereign producer of oil and a member of the Opec+ alliance, would continue to support the pact.

The pact “has already established itself as an effective tool in ensuring long-term stability in global energy markets”, Mr Putin told a meeting in Moscow.

According to the Opec+ pact, the oil producers currently restrict 1.7 million barrels per day of production. The members of the alliance, which also include non-members led by Russia, are meeting this week to decide on a course of action to arrest falling prices.

However, Opec did not convene an early meeting despite calls by Saudi Arabia, the group's de facto leader, to halt the slide.

A technical committee meeting in February recommended that the group maintain its current pact, valid until the end of the first quarter, through to the end of the year. The core group also recommended a short term deepening of cuts of 600,000 bpd until the end of the second quarter.

West Texas Intermediate could stabilise around $45 to $48 per barrel in the run-up to the Opec meeting, noted Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

"To have a sustainable positive impact on oil prices, the Opec cut should take into consideration the size of the coronavirus-led slump in demand. A cut of 1-million-barrel-per-day may have a limited positive influence," she added.