Oil futures fell Monday, under pressure as the Organization of the Petroleum Exporting Countries and its allies debate the fate of existing output curbs in the face of a renewed rise in COVID-19 cases in the U.S. and Europe.
But crude was still set to log a large monthly rise in November.
OPEC+ oil ministers were discussing a three-to-four-month extension of existing output cuts, as well as the prospect of a gradual rise in output from January in a two-day meeting that begins Monday, Reuters reported.
“Oil bulls would like to see an extension of the current reduction of 7.7 million barrels per day for another 6 months. However, this could come at a cost of losing market share to the U.S. shale oil producers,” said Hussein Sayed, chief market strategist at FXTM, in a note.
In opening remarks Monday, Abdelmadjid Attar, Algeria’s Minister of Energy, who is also president of the OPEC Conference, noted that 2020 continues to be a year of “immense challenges” caused by the COVID-19 pandemic and that global oil demand is expected to fall by around 9.8 million barrels a day this year.
In 2021, however, oil demand growth is “expected to be high, in the tune of 6.1 [million barrels per day],” he said. “This brighter outlook for 2021 gives us a cautious optimism and is a clear indication that we are on the right path.”
Ahead of the Monday’s OPEC Conference, Iranian Oil Minister Bijan Zanganeh said he expected the meeting to be “difficult” as some members had different views on whether to extend existing oil cuts, according to a report from Reuters.
West Texas Intermediate crude for January delivery was down 28 cents or 0.6%, at $45.25 a barrel on the New York Mercantile Exchange. The U.S. benchmark was on track for about a 26% monthly advance in November, based on the front-month contract, according to FactSet.
The global benchmark, February Brent crude was off 39 cents, or 0.8%, at $47.86 a barrel on ICE Futures Europe. The front month January Brent crude, which expires at the end of the day’s session, was down 51 cents, or 1.1%, at $47.67 a barrel. Brent, based on the front-month contract, is on track for a nearly 26% November rise.
OPEC+ agreed in April to cut output by 9.7 million barrels a day, then scaled those reductions back to 7.7 million barrels a day in August. Under the existing plan, the group would bring back another 2 million barrels a day of production in January, but market participants have appeared convinced that step will be delayed, Sayed noted, though the question remains for how long.
Meanwhile, crude has rallied in November, with gains attributed to optimism around vaccine candidates that have shown significant promise in preventing COVID-19 infections in late-stage trials.
At the same time, investors are wrestling with a rising number of COVID-19 cases in the U.S. and Europe, as well as the possibility that U.S. cases could further accelerate following last week’s Thanksgiving Day holiday in the U.S.
Back on Nymex, prices for petroleum products moved lower, with gasoline leading the losses ahead of the expiration of the December contracts at the end of the day’s session.
December gasoline lost 1.4% to $1.2645 a gallon and December heating oil traded at $1.365 a gallon, down 1.1%.
January natural gas, meanwhile, bucked the trend among energy peers to tack on 4.5%, trading at $2.972 per million British thermal units.
Prices for the heating fuel got a boost on “forecasts for below-normal temperatures for parts of the southern and eastern US over the next 6 to 10 days,” said Christin Redmond, commodity analyst at Schneider Electric, in a note.
“The entire month of November was marked by unseasonably warm temperatures across most of the U.S., which reduced heating demand and left more gas in storage than normal over the past 2 weeks. But a wave of cold weather in early December should boost heating demand and tighten market balances over the period,” Redmond wrote.