Yahoo Finance Oil takes a hit as nervous investors wait for OPEC+ production decision
Oil futures fell on Monday morning as investors awaited a decision by the Organization of the Petroleum Exporting Countries and allies including Russia (OPEC+) on potentially large output cuts intended to balance global markets.
January Brent crude futures (CL=F) were down 1.5% at 9.15am in London, falling as much as 2%, to $47.17 a barrel, earlier in the session.
Brent crude (BZ=F) also fell around 2% in early trade in London to trade at $47.23 a barrel.
Despite losses, however, the benchmarks are looking at a rise of more than a fifth overall in November. These would clock the strongest monthly gains since markets began to recover from COVID-19-related sell offs in May.
Optimism is returning amid positive coronavirus vaccine news and the prospect of a return to normality.
Monday’s knock to prices comes as oil-watchers anticipate OPEC+ delaying next year’s planned increase in oil output. A second wave of COVID-19 across many nations has knocked global fuel demand.
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The group had agreed to raise output by 2 million barrels per day (bpd) in January following record cuts this year.
Talks are ongoing, having started on Sunday, but are yet to reach consensus on policy for the year ahead, according to reports by Reuters.
The meeting on Monday is set to start at 1pm London time.
“Whilst there seems to be broad agreement on extending current level of cuts for some time beyond the start of the year, the United Arab Emirates and Kazakhstan are thought to be dissenting,” said Neil Wilson, chief market analyst for Markets.com.
“Saudi Arabia will flex its muscles to get a deal to keep a lid on output. WTI (Jan) slipped under $44.50 before paring losses. Shell and BP both fell over 2% in early trade,” he continued.
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Analysts at Barclays noted they expect a three-month delay in upping production targets due to a resurgence of COVID-19 cases.
“Our constructive oil forecasts with Brent rising to $49 by Q2 21 and $61 by Q4 21, which are $4-8 above the curve and consensus on average for 2021, are based on our expectations that the potential spill-over from near-term weakness would be offset by continued OPEC+ support and the potential for an incremental demand boost in H2 21 on the back of high-efficacy vaccines,” Barclays analysts said in a note.
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