Oil edged lower on Monday on uncertainty about whether the world’s major oil producers would agree to extend its deep output cuts at talks this week.
The day’s decline came after a strong month for crude benchmarks, which jumped about 27% in their biggest monthly gains since May on hopes for forthcoming vaccines for COVID-19 that would presumably help economic activity and oil demand resume.
Brent crude for January delivery, which expires on Monday, settled at $47.59 a barrel, dropping 59 cents, or 1.2%. The more actively traded February Brent contract was down 37 cents at $47.88.
U.S. West Texas Intermediate crude for January delivery settled at $45.34 a barrel, down 19 cents, or 0.4%.
The market was waiting on the Organization of the Petroleum Exporting Countries and its allies to come to agreement over whether to pare their supply cuts from the current 7.7 million barrels per day.
However, OPEC+ delayed talks on 2021 oil output policy to Thursday, three sources said, as key players were still in disagreement on how much oil they should pump amid weak demand.
OPEC+, which includes the Organization of the Petroleum Exporting Countries, Russia and other allies, had been scheduled to hold its meeting on Tuesday at 1300 GMT after discussions of key ministers on Sunday failed to reach a consensus.
The group was scheduled to ease current production cuts by 2 million bpd from January, but with demand still under pressure from the coronavirus pandemic, OPEC+ has been considering extending current cuts into the first months of next year, a position backed by defacto OPEC leader Saudi Arabia, sources said.
Oil prices have climbed this month as COVID-19 vaccine developments raise hopes for an economic recovery that could boost fuel demand.
“If we get to the point of an emergency vaccine approval, that would be supportive, but the market understands that for the next couple weeks we’re going to need some support from OPEC,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
A poll of 40 economists and analysts forecast Brent would average $49.35 a barrel next year, estimating that prices would have some trouble sustaining a rally.
Demand has recovered in Asia but not Europe and the Americas, presenting OPEC+ with a “challenging choice on whether to delay or bring back more oil,” said FXTM analyst Hussein Sayed.
Goldman Sachs said a winter surge in COVID-19 cases would not prevent the oil market rebalancing as a result of vaccine progress. It saw Brent rising to $65 in 2021.