Home Industry Energy Oil extends drop as OPEC+ struggles for consensus on output plan Oil has just capped its biggest monthly increase since May on optimism energy demand will rebound as Covid-19 vaccines are rolled out in the coming weeks by Bloomberg December 1, 2020 Oil fell for a third day as OPEC+ sought more time to reach a deal on production policy after a meeting broke down without an agreement. Futures were 0.7 per cent lower in New York. Ministers will now meet on Thursday rather than Tuesday to allow more time to deliberate on whether to delay a planned increase in output from January. While some see the market as too fragile to absorb additional barrels, others are keen to pump more to take advantage of higher prices following Covid-19 vaccine breakthroughs. Asia’s recovery, meanwhile, gathered pace. Factory activity in some of the region’s biggest export-led economies including South Korea and China surged in November. The rebound highlights the uneven global demand picture OPEC+ is facing, with Europe and the U.S. grappling with a resurgent outbreak. Oil has just capped its biggest monthly increase since May on optimism energy demand will rebound as Covid-19 vaccines are rolled out in the coming weeks. OPEC+ talks have been complicated by the price gain and cracks have appeared in the alliance, with Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman signaling his dissatisfaction with the situation on Monday by telling others he may resign as co-chair of a committee that oversees the output deal. There had been some consensus building between ministers around keeping cuts for another three months, but friction has emerged with the United Arab Emirates on quotas, while Kazakhstan wavered on an extension. “OPEC+ is stuck between a rock and a hard place because near-term indicators show Europe and U.S. demand is weak, but Asia is stronger,” said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia. “Even though it’s a sign that the fracture within the group is deep, the fact that they’re willing to give two days to sort out disagreements is a positive sign.” Prices * West Texas Intermediate crude for January delivery fell 32 cents to $45.02 a barrel on the New York Mercantile Exchange as of 12:25 p.m. Singapore time after slipping 0.4 per cent on Monday * Brent for February settlement dropped 0.6 per cent to $47.58 on the ICE Futures Europe exchange after losing 0.8 per cent in the previous session * Crude futures on the Shanghai International Energy Exchange rose 1.7 per cent to 286.3 yuan a barrel after falling 2.6 per cent on Monday * Brent’s three-month timespread was 20 cents a barrel in contango, compared with 44 cents on Monday. The spread has flipped back into contango — where prompt prices are cheaper than later-dated ones – after moving into backwardation last week amid optimism over vaccine breakthroughs. OPEC+ is likely to agree on a face-saving compromise, with a short extension the probable outcome followed by a phased return of production, according to RBC Capital Markets. However, if cuts are eased, Brent oil prices are at risk of dropping back toward $40 a barrel and the market faces an oversupply of as much as 2 million barrels a day next quarter, Wood Mackenzie Ltd. said. Global fuel demand, meanwhile, still remains shaky. Indian diesel sales in November dropped year-on-year after a festive boost in consumption proved fleeting, while a slow Thanksgiving for U.S. gasoline demand is foreshadowing what will likely be a tough season for fuel producers. Tags Covid-10 Vaccine energy oil OPEC output cuts prices Saudi Arabia 0 Comments You might also like Riyadh Metro to kick off first phase on Nov 27, includes 3 lines Moody’s upgrades Saudi Arabia’s rating on economic diversification Citi secures licence for regional headquarters in Saudi Arabia Abu Dhabi’s Masdar, Silk Road Fund to co-invest $2.8bn in renewables