Oil Slips Near $41 With OPEC+ Meeting to Review Output Underway
November 17, 2020 EnergyNow Media
By Alex Longley
(Bloomberg) Oil fell below $41 a barrel amid broader market declines while traders weighed the potential for OPEC+ to delay a planned easing of output cuts. While headline prices have gained on the growing prospect of an effective Covid-19 vaccine in recent days, an OPEC+ panel said the group — which is meeting again on Tuesday — should consider holding off on easing bumper production curbs by three to six months. Saudi Arabia’s energy minister said the market recovery is looking resilient in Asia, and a vaccine means there is light at the end of the tunnel.The producer alliance is wrestling with a bifurcated demand outlook. In Asia, where consumption has recovered strongly from Covid-19, refiners have been snapping up barrels from the Middle East, U.S. and Russia. The structure of Oman futures on the Dubai Mercantile Exchange has surged into a bullish backwardation — indicating tight supplies — in recent days, as strength in the region’s crude market has grown.
But in Europe and the U.S., it’s a different picture. Covid-19 cases are growing and movement indicators, such as traffic data, have been declining, particularly in Europe. With OPEC+ balancing those concerns against resurgent Asian demand, a technical committee said the group should delay an output hike of almost 2 million barrels a day in January.
Read: Oil Buying Frenzy Spurred by China Quota Jump and Iraqi Cuts
“Oil prices have received a boost from a string of positive vaccine news lately,” said Jens Pedersen, a senior analyst at Danske Bank A/S. “The path toward a vaccine could include more restrictions, which will hit demand.”
West Texas Intermediate for December delivery lost 51 cents to $40.85 a barrel as of 9:09 a.m. New York time
Brent for January settlement lost 1.2% at $43.31
With the prospect of a vaccine boosting sentiment in the near-term, money managers and other investors cut their bearish bets on WTI by the most since April last week, according to CFTC data. There was also the biggest uptick in short positions from swap dealers in seven months, usually a sign of producer hedging.
A delay to the planned OPEC+ output hike would also go some way to offsetting the increase in supply coming from Libya, which has climbed above 1 million barrels a day.
Other oil-market news:
WTI December options contracts expire on Tuesday. There are 22 million barrels’ worth $40 puts expiring.
America’s long effort to revive its virus-battered economy has been put on pause — or thrown into reverse — across much of the country as new infections soar. California on Monday reinstituted bans on many indoor businesses, while Michigan has ordered a three-week partial shutdown.
Former U.S. Secretary of State Henry Kissinger said the incoming Biden administration should move quickly to restore lines of communication with China that frayed during the Trump years, or risk a crisis that could escalate into military conflict. He was speaking at the Bloomberg New Economy Forum.
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