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Oil Near $45 With OPEC+ Struggling for Consensus on Output


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These translations are done via Google Translate

By Ann Koh and Alex Longley

(Bloomberg) Oil traded near $45 a barrel in New York with OPEC seeking more time to reach a deal on production policy after a meeting broke down without an agreement. Futures flipped between gains and losses having earlier been buoyed by a weaker dollar. The recovery in Asia gathered pace as factory activity in South Korea and China surged in November. The rebound highlights the uneven global oil demand picture OPEC+ is facing, with Europe and the U.S. grappling with a resurgent outbreak. Ministers from the alliance 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 oil to take advantage of higher prices following Covid-19 vaccine breakthroughs.

Oil posts largest monthly gain since May amid vaccine hopes

The talks have been complicated by oil’s biggest monthly gain since May and cracks have appeared in the alliance. Saudi Arabian Energy Minister Prince Abdulaziz bin Salman signaled 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+ will probably have to make concessions that could be in the form of a shorter extension and then a gradual increase in production, Bob McNally, president of Rapidan Energy Advisors, said in a Bloomberg television interview.

“Some kind of compromise is still very, very likely to be reached,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “The market doesn’t seem to be too worried about the whole thing. And the reason is of course that we are getting increasingly closer to the Covid-19 endgame.”

Prices
  • West Texas Intermediate crude for January delivery lost 10 cents to $45.24 a barrel as of 11:17 a.m. London time
  • Brent for February settlement rose 1 cent to $47.89

OPEC+ is likely to agree on a face-saving compromise, with a short extension the probable outcome followed by a phased return of production, RBC Capital Markets analysts including Helima Croft wrote in a report. 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.

Other market news:
  • An armada of around 20 tankers laden with U.S. oil will be heading to Asia this month as the region continues to outpace the rest of the world in its recovery from the Covid-19 pandemic.
  • An increase in vessels being fitted with pollution-reducing kits and unusually strong demand for container shipping is providing a boost to the dirtiest marine fuel.
  • Norway’s oil and gas production is under threat again as a long-running dispute with security guards over wages shuts down heliports and affects transport to projects out at sea.


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