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Nov 17, 2020

Oil dips lower after OPEC+ meeting ends without output decision

Commodities update: Oil rallies on vaccine optimism, copper hits two-year high


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Oil clung to losses after an OPEC+ committee meeting ended without a concrete signal that producers will reverse plans to increase output come January.

Futures dropped as much as 1.9 per cent in New York on Tuesday. OPEC+ said oil producing countries must be ready to act when the group gathers for its next full meeting in two weeks after a panel of ministers met this week. The group had been discussing postponing an output increase by three to six months. Yet, Saudi Energy Minister Prince Abdulaziz bin Salman said the market is too fluid to make a decision on the cuts now.

“The market always likes to see definitive statements on cuts to have a clear idea of what road that is and not getting that just means more uncertainty,” said Bill O’Grady, executive vice president at Confluence Investment Management in St. Louis.

The producer alliance is wrestling with a bifurcated demand outlook. In Asia, where consumption has recovered substantially from COVID-19, refiners have been snapping up barrels from the Middle East, U.S. and Russia. The structure of Oman futures on the Dubai Mercantile Exchange has surged into a bullish backwardation -- indicating tight supplies -- in recent days. Yet, in Europe and the U.S., a surge in coronavirus cases has led to tougher restrictions limiting movement and consumption.

“There’s the overhanging doom and gloom of a COVID resurgence and growing concerns about a long-term impact on jet fuel demand,” said Gary Cunningham, director of account management and research at Tradition Energy. “All of it is going to affect overall global consumer demand and that’s a big hit on the economy and a big hit on outlooks for petroleum demand.”


  • West Texas Intermediate for December delivery lost 22 cents to US$41.12 a barrel at 12:20 p.m. in New York
  • Brent for January settlement declined 31 cents to US$43.51 a barrel

The OPEC+ alliance is trying to avoid oversupplying the market at a time when ministers have voiced both optimistic and cautious notes on the strength of global demand. Prince Abdulaziz said vaccine developments provide a light at the end of the tunnel, but the market has some way to go before getting there.

The producer group has been dropping hints for weeks that its plan to add almost 2 million barrels a day to oil markets next year may not be such a good idea as demand remains depressed.

Meanwhile, in the U.S., expectations for a second straight weekly build in crude stockpiles is also pressuring prices lower. The industry-funded American Petroleum Institute will report its figures later Tuesday ahead of a U.S. government tally on Wednesday.

Other oil-market news:

  • Saudi Aramco launched a jumbo bond sale on Tuesday to help fund a US$75 billion dividend, returning to the debt markets for the first time since April of last year.
  • Activist investor Kimmeridge Energy Management Co. has built new positions in Ovintiv Inc., PDC Energy Inc., and Cimarex Energy Co. and plans to push for changes at the oil and gas companies to improve their performance and governance.