By Myra P. Saefong and William Watts
Oil futures settled a bit lower Monday as the Organization of the Petroleum Exporting Countries and its allies continued to debate the fate of existing output curbs in the face of a renewed rise in COVID-19 cases in the U.S. and Europe.
Still, crude logged a sharp monthly rise in November, buoyed by hope for a vaccine that would ease virus-related economic restrictions and losses in energy demand.
The group of oil producers known as OPEC+ was scheduled to meet Tuesday to announce a final decision, but reports surfaced late Monday that the group has postponed their meeting to Thursday, prompting prices to extend their losses into the electronic trading session.
Herman Wang, chief OPEC correspondent for S&P Global Platts, tweeted that the OPEC and non-OPEC meeting will be held on Thursday because “OPEC needs more time to get its house in order.” Javier Blas, chief energy correspondent at Bloomberg News, also tweeted about the postponement to Thursday, citing the need for further consultations.
West Texas Intermediate crude for January delivery /zigman2/quotes/211629951/delayed CL.1 -0.75% was at $45.06 a barrel in electronic trading late Monday, after losing 19 cents or 0.4%, to settle at $45.34 a barrel on the New York Mercantile Exchange. The U.S. benchmark saw a 26.7% monthly advance in November, based on the front-month contract, according to Dow Jones Market Data.
The global benchmark, February Brent crude fell 37 cents, or 0.8%, to settle at $47.88 a barrel on ICE Futures Europe. The front month January Brent crude , which expired at the end of the day’s session, lost 59 cents, or 1.2%, at $47.59 a barrel. Brent, based on the front-month contract, saw a 27% November rise.
The OPEC Conference held on Monday concluded without an official decision on production and said producers would reconvene Tuesday, though some reports say oil producers reached a general agreement to extend current output cuts.
Algeria Minster of Energy Abdelmadjid Attar said on Monday that OPEC members reached an agreement to extend existing oil production cuts of 7.7 million barrels per day by three months from January, according to Reuters , which cited a report from Algeria’s state news agency APS.
Attar, who is also president of the OPEC Conference, said OPEC would work with other members in the OPEC+ alliance at Tuesday’s meeting to back that policy for an extension of the cuts, the report said.
The OPEC+ meeting is “probably going to conclude in an extension” of the existing cuts of 7.7 million barrels per day, “the question is, for how long?” Stewart Glickman, energy equity analyst at CFRA Research told MarketWatch.
“An extension of 3 months or less would probably be viewed as a disappointment, because it likely is not enough time for COVID-19 infection data to offer hopeful news,” he said. “An extension of 6 months or more is probably a positive, and something in the 4 [to] 5 month range is in my opinion somewhat neutral.”
OPEC+ agreed in April to cut output by 9.7 million barrels a day, then scaled those reductions back to 7.7 million barrels a day in August. Under the existing plan, the group would bring back another 2 million barrels a day of production in January.
In opening remarks for the OPEC Conference Monday , Attar noted that 2020 continues to be a year of “immense challenges” caused by the COVID-19 pandemic.
Peter McNally, global sector lead at Third Bridge, told MarketWatch in emailed commentary that the issues facing OPEC+ have not changed and the group continues to deal with “how much oil to add back to the market and compliance with output targets.”
“Getting more than 20 countries to agree on the precise timing and amounts of additional oil is the challenge,” he said, adding that experts at Third Bridge believe the world needs more oil from OPEC members, but the “timing is tricky given the seasonal and cyclical factors impacting demand.”
Meanwhile, crude has rallied in November, with gains attributed to optimism around vaccine candidates that have shown significant promise in preventing COVID-19 infections in late-stage trials.
At the same time, investors are wrestling with a rising number of COVID-19 cases in the U.S. and Europe, as well as the possibility that U.S. cases could further accelerate following last week’s Thanksgiving Day holiday in the U.S.
Back on Nymex, prices for petroleum products finished lower, with gasoline leading the losses as the December contracts expired at the end of the day’s session.
December gasoline lost 2.6% to $1.2489 a gallon, with front-month contract prices up 19% for the month, while December heating oil settled at $1.3559 a gallon, down 1.8% for the day, but up more than 25% for the month.
January natural gas , meanwhile, bucked the trend among energy peers to tack on 1.4%, settling at $2.882 per million British thermal units. Prices still lost around 14% for the month.
Prices for the heating fuel got a boost Monday on “forecasts for below-normal temperatures for parts of the southern and eastern US over the next 6 to 10 days,” said Christin Redmond, commodity analyst at Schneider Electric, in a note.
“The entire month of November was marked by unseasonably warm temperatures across most of the U.S., which reduced heating demand and left more gas in storage than normal over the past 2 weeks. But a wave of cold weather in early December should boost heating demand and tighten market balances over the period,” Redmond wrote.