Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Oil Prices Off Highs on Fears for OPEC+ Unity

Published 12/01/2020, 11:48 PM
Updated 12/02/2020, 12:02 AM
© Reuters.
LCO
-
CL
-
GPR
-

By Geoffrey Smith 

Investing.com -- Crude oil prices came off their highs in early trade on Tuesday amid fears that the collective discipline of major oil producers is fraying, and that they after all proceed with at least a small increase in output at the start of next year. 

A major factor in the 33% rally of the last month has been the growing belief that the economic slowdown in Europe and the U.S. due to the latest wave of the pandemic would lead OPEC and its allies, chiefly Russia, to freeze output at its current level for at least another couple of months, rather than raise it by 1.9 million barrels a day, as had been foreseen when the group last met. 

However, the United Arab Emirates, reportedly supported by non-OPEC member Russia, had floated the idea of raising production by 500,000 barrels a day from January 1. The suggestion reportedly prompted Saudi Arabia to mull giving up the joint-chairmanship of the committee that coordinates output policy - a move that would be interpreted as a big move in the direction of a new price war, only a few months after the end of the last one.  

The failure to agree on an output level for OPEC as a group meant that it pushed back until Thursday a final decision in concert with Russia and other non-OPEC members.

By 1100 AM ET (1700 GMT), U.S. Crude futures were down over a dollar a barrel, or 2.3%, at $44.30 a barrel, while Brent futures were down 1.5% at $47.17 a barrel. 

U.S. Gasoline RBOB Futures were down 2.1% at $1.2154 a gallon. 

Analysts said Monday's developments didn't definitively tilt the market one way or the other, but left the glass either half-full or half-empty, depending on your perspective.

"The bearish way of looking at things is that OPEC+ is far from settled on postponing its planned production increase from January, a development that the market thought as almost ‘a done deal’ prior to Monday’s meeting," said Rystad Energy's head of oil markets Bjornar Tonhaugen in emailed comments. The bullish approach, he added, is to see that the delay of the OPEC+ meeting "shows that there is determination from key OPEC+ producers to negotiate and push for a deal to amend the standing agreement and not raise output as planned, to protect prices."

With talks among OPEC members still ongoing, attention may switch later to the American Petroleum Institute's weekly inventories data, which are due for release at 4:30 PM ET. Analysts expect a draw of 2.27 million barrels from the previous week. 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.