Oil down ahead of OPEC+ meeting

Oil was down on Monday morning in Asia as investors wait to see if OPEC+ will extend supply caps past January.

Brent oil futures fell 0.87% to $47.83 by 11:26 PM ET (3:26 AM GMT) and crude oil WTI futures slid 1.05% to $45.05.

Investors await the outcome of the Organization of Oil Exporting Countries and their allies (OPEC+)’s two days of meetings that begin later today. Investors are wary of the outcome, as the usually monolithic bloc has been showing signs of internal dissent.

The 180th Meeting of the OPEC Conference and the 12th OPEC and non-OPEC Ministerial Meeting have been expected to extend oil supply quota cuts beyond their current expiry date in January.

However, several members, including the United Arab Emirates (UAE) and Iraq, have been pushing to allow the restrictions to expire, as their oil-dependent economies have been feeling the pinch of both low prices and low production volume.

“Signs of disunity in OPEC raised the prospect of the group not agreeing to an extension of current production cuts,” ANZ analysts told Reuters.

“Some members, including UAE and Iraq, have expressed misgivings about its policy over supply,” they added.

ANZ has estimated that oil surplus would reach between 1.5 and 3 million barrels per day should the cuts not be maintained. Preliminary talks on Sunday failed to find consensus on the issue.

Should the dissenting group push through some supply hikes or the return to previous production levels, prices will be pushed down. Oil has risen over 20% in November as positive vaccine news has raised the expectation of a return to an economic environment more closely resembling the one before the Covid-19 pandemic dragged demand down into the doldrums.

Beyond the OPEC+ issue, markets will take some positivity from China’s latest manufacturing data, the China Manufacturing Purchasing Managers Index has risen faster than expectations, at 52.1 as opposed to a forecast 51.5.

US API weekly crude oil stock numbers are due out tomorrow.

First published on Investing.com