Oil erased earlier losses with OPEC+ seeking more time to reach a deal on production policy after a meeting broke down without an agreement. Futures were 0.7% higher in New York, buoyed by a weaker dollar and a rally in equity markets. OPEC+ ministers 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 to take advantage of higher prices following Covid-19 vaccine breakthroughs.
Asia’s recovery, meanwhile, gathered pace. Factory activity in some of the region’s biggest export-led economies including South Korea and China surged in November. The rebound highlights the uneven global demand picture OPEC+ is facing, with Europe and the U.S. grappling with a resurgent outbreak.
OPEC+ talks have been complicated by oil’s biggest monthly gain since May and cracks have appeared in the alliance. Saudi Arabia’s 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.”
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