Oil slips from 8-month high as rally fizzles out

Saket Sundria and James Thornhill, Bloomberg News

Oil pumping jacks, also known as "nodding donkeys", operate in an oilfield near Neftekamsk, in the Republic of Bashkortostan, Russia, on Thursday, Nov. 19, 2020. The flaring coronavirus outbreak will be a key issue for OPEC+ when it meets at the end of the month to decide on whether to delay a planned easing of cuts early next year. Photographer: Andrey Rudakov/Bloomberg , Bloomberg

Oil fell from an eight-month high as the dollar recovered, while disparities in demand set the stage for OPEC+’s key policy meeting next week.

Futures in New York dropped one per cent, with the dollar erasing earlier declines to trade higher.

After stellar gains so far this month, both West Texas Intermediate and Brent crude futures settled technically overbought on Wednesday, a sign that a possible reversal had been on the cards.

Oil has jumped around 27 per cent this month as signs that COVID-19 vaccines are imminent boosted expectations for a swift recovery in energy demand next year. However, while there are indications that Asian consumption remains healthy, Europe is still lagging. On Wednesday, Germany extended a partial lockdown to curb the spread of coronavirus for at least three more weeks.

“Great news on the vaccines, but it will be months until they are widely available,” said Spencer Welch, vice president of oil markets and downstream consulting at IHS Markit Ltd. “The oil market still has plenty of time left at sub-US$50 a barrel, including most of 2021.”

Prices:

West Texas Intermediate for January delivery declined one per cent to US$45.27 a barrel at 8:54 a.m. New York time
Brent for the same month fell 1.1 per cent to US$48.06

Crude’s rapid price gains this month pose a headache for OPEC+ as it considers whether to postpone a planned increase in output, as they lend weight to arguments from some members demanding to pump more. The group will delay a supply increase by three months, according to a survey of oil analysts, traders and refiners.

In the meantime, a strike in Norway could threaten some oil and gas production. If a long running safety guard strike isn’t resolved before the weekend, two of the country’s fields may have to stop flows.

Other oil-market news:

Iraq extended the deadline for bids in its first ever oil pre-payment deal until the end of next week, according to people familiar with the matter.
Repsol SA outlined its plans for a greener future, saying it intends to wind down the search for oil and expand its renewable capacity fivefold during the next decade.
A director at the trading arm of Mexico’s state oil company was asked to resign after authorizing payments under a profit-sharing plan, according to a person familiar with the matter.

--With assistance from James Thornhill.