Oil prices fell 2% on Monday as investors waited for OPEC and allies’ decision on whether to extend large output cuts to balance global markets, according to Reuters. OPEC+ held an initial round of talks on Sunday but did not reach a consensus on oil output policy for 2021 ahead of Monday and Tuesday meetings.
- OPEC+, including Russia will consider extending existing cuts for three to four months or increasing output gradually from January.
- Some members may be reluctant to maintain output discipline and disagreement will have price repercussions including questioning the existence of OPEC+
- January Brent crude futures, set to expire later on Monday, dropped 69 cents or 1.4% to $47.49 a barrel by 1220 GMT while Brent declined by 65 cents at $47.60 a barrel.
- U.S. West Texas Intermediate crude futures for January dropped 53 cents, or 1.2%, to $45 a barrel.
- Goldman Sachs sees Brent rising to an average of $65 a barrel next year while economists in a Reuters poll suggested it could rise to $49.35 a barrel following vaccine progress
- Despite the current drop, oil futures are expected to rise by more than 20% in November, the strongest monthly gain since May, boosted by promising vaccine developments.
- Oil prices had recovered in Asia but not America and Europe, presenting a challenge to OPEC+ on output policy in 2021
- China has supported oil prices as factory activity rose the fastest in more than 3 years in November
- Previously, OPEC+ agreed to raise output by 2 million barrels per day (bpd) in January after record supply cuts this year.
Oil futures are currently declining. CL! is down 1.19%