Oil Prices Edge Down as OPEC and Allies Seek Consensus on Output

Tuesday, December 1, 2020

Oil prices inched down on Tuesday as investors awaited direction from OPEC and its allies after the producers postponed a formal meeting to decide whether to lift output from January.

Brent crude was down 19 cents at $47.69 a barrel by 1430 GMT and West Texas Intermediate was down 36 cents at $44.98.

Both contracts have surged around 27% in November, pushed up by hopes that COVID-19 vaccines would boost the global economy and fuel demand, and aided by expectations that oil producers would keep a tight rein on output amid a new wave of the virus.

The Organization of the Petroleum Exporting Countries, Russia, and other allies, a group known as OPEC+, delayed talks on next year's output policy to Thursday from Tuesday, as the main players had yet to agree, sources said.

"It is not entirely clear whether it is good news -- the will is there to come up with a solution -- or bad -- one step closer to a fall-out -- but the market is not panicking just yet," PVM analysts said.

The group was due to ease current production cuts by 2 million barrels per day (bpd) from January.

With demand still weak, OPEC+ has been considering extending current cuts into the first months of 2021, a position backed by de facto OPEC leader Saudi Arabia, sources say. Russia, meanwhile, backs a gradual increase.

"The group will probably find some face-saving compromise, with a short extension being the most likely outcome followed by a phased production return," said Helima Croft at Royal Bank of Canada.

"Nonetheless this latest fracas does not bode well for collective cohesion in 2021 as vaccine optimism abounds and producers anticipate a strong recovery," Croft added.

A Reuters poll of 40 economists and analysts forecast Brent would average $49.35 a barrel next year.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Andrew Cawthorne, Edmund Blair and Jonathan Oatis)

Categories: Energy Activity Production Oil Price

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