Oil held onto gains as market uncertainty over OPEC’s upcoming decision on production tugged the price in opposite directions.

West Texas Intermediate rose 1.2 per cent to settle above US$78 Tuesday, after trading in a US$3 range. Volatility was expected to rise in the days leading up to the meeting this weekend as traders search for any clue on how OPEC and its allies will respond to deteriorating market conditions for producers. The shape of the futures curve has flipped in recent weeks, signaling an oversupplied market. 

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OPEC+ does “not like contango and that is what has raised market expectations of deeper cuts,” Amrita Sen, chief oil analyst at consultant Energy Aspects, said in a Bloomberg TV interview. “I’m not ruling out deeper cuts -- that’s of course on the table -- but I would say that’s not our base case.”

Earlier in the session, prices rallied above US$79 a barrel after Beijing said it would bolster vaccination among seniors, a move regarded by health experts as crucial for reopening the economy of the world’s biggest crude importer. Prices briefly flirted with losses after Reuters reported that the production cartel would stick with its current oil-output policy, citing unidentified people.

On Monday, Bloomberg reported that OPEC+ may consider supply cuts to counter market weakness; a move that could potentially deepen curbs agreed to last time members convened in October. 

Oil has lost about 9 per cent this month as a deteriorating physical market revealed slackening demand. OPEC+ gathering precedes a deadline for European Union curbs on Russian flows as the bloc struggles to agree on a price cap. Concerns that tighter monetary policy will slow consumption as well as doubts about demand in China prompted OPEC+ to announce a major output cut last month.


  • WTI for January delivery rose 96 cents to settle at US$78.20 a barrel in New York
  • Brent for January settlement fell 16 cents to US$83.03 a barrel.

The weakening at the front of the oil futures curve has been precipitous. On Monday, Brent’s nearest timespread closed at its weakest level since 2020, a sign of oversupply. Until this month it had been in the opposite structure, known as backwardation, all year.