Oil’s record rally sputtered as investors assessed whether OPEC and its allies will extend the supply curbs that helped drive prices higher. Futures settled slightly lower in New York on Monday as the OPEC+ group that includes Russia prepares to discuss maintaining record output curbs for an extra one to three months. But a proposal to bring forward the meeting by several days to Thursday was still being debated two days after it was first floated.
Without an extension, the existing caps begin to wind down next month. Any changes to the existing deal will hinge on negotiations between Moscow and Riyadh. And as of last week, Russia’s position was that it wanted to start easing the cuts next month.
Meanwhile, onshore oil exploration in the U.S. shrank for the 11th consecutive week to a level not seen since before the shale revolution kicked off more than a decade ago. Despite well shut-ins across North America, U.S. imports of Saudi crude have surged, swelling supplies held in storage.
American stockpiles are “probably heading higher at least in the short term as more imports come in,” said Peter McNally, an analyst at Third Bridge Group Ltd. “The market is oversupplied to begin with. Everyone is looking for more signs of demand firming.”