Oil uncertain as market awaits OPEC+ move
LONDON, December 1, 2020 – Oil was recovered on Tuesday after an overnight fall in Asia, with investors unclear as to whether the world’s major producers would extend output cuts, which would support oil prices.
Brent oil futures were steady at $47.88 by 05:50 AM ET (10:49 AM GMT) and WTI futures fell 0.11% to $45.27.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) put off output policy talks until Thursday, Reuters reported. The market is now waiting to see whether the organization will continue with current production cuts of 7.7 million barrels per day or curb those cuts. The group was originally set to ease cuts by about 2 million bpd starting in January, but demand remains weak.
Some investors were expectant that the cuts would happen.
“I suspect that, ultimately, OPEC+ will extend the production cut programme by three months,” Mizuho Securities director of energy futures Bob Yawger told Reuters.
But any accord would require some producers to agree to larger cuts moving forward, with those barrels being allocated to the United Arab Emirates (UEA) “for the balance of the agreement”, Yawger added.
November was a strong month for oil, with both benchmarks rising by about 27% as investors held on to hopes that a vaccine would speed up a return to normalcy from Covid-19 lockdowns.
Investors are now weighing a renewed surge of Covid-19 cases around the world and new lockdowns in places as disparate as London, Hong Kong and New York as well as the likely approval of multiple Covid-19 vaccines in the coming weeks. Moderna Inc (NASDAQ:MRNA) will request clearance for its vaccine candidate mRNA-1273 in the US and Europe, the company said on Monday.
Investors are also looking to distill testimony from US Federal Reserve Chairman Jerome Powell and Treasury Secretary Steve Mnuchin on Monday to the Senate Banking Committee, both of whom said the US economy is on the path to recovery but will need some help.
Mnuchin called on Congress to use the CARES Act, worth $455 billion, to put in place a stimulus package to give the economy a boost. Powell, in turn, pointed to moderate growth as a concern.
Powell will continue to testify before Congress later in the day and on Wednesday, with the Fed convening for its policy meeting on Dec. 15 and 16.
Also supporting prices, China’s Caixin manufacturing Purchasing Managers Index (PMI) for November came in at 54.9 in November, up from 53.6 in October.
Investors are now looking to crude oil supply data from the American Petroleum Institute, due later in the day.
First published on Investing.com