- Investors are waiting for OPEC and its allies to make a final decision on whether to extend the crude oil production limit agreement on Tuesday.
- The OPEC meeting held on Monday has ended without an official decision.
- Gasoline and heating oil fell, while natural gas rose.
Crude oil futures closed down slightly on Monday. However, throughout November, due to good news about coronavirus vaccine development, crude oil closed sharply higher this month. The United States and Europe’s new coronavirus pneumonia cases continue to rise.
Meanwhile, investors are waiting for the Organization of the Petroleum Exporting Countries (OPEC) and its allies to make a final decision on whether to extend the crude oil production limit agreement on Tuesday.
West Texas Intermediate crude oil for January delivery on the New York Mercantile Exchange fell slightly by 19 cents to $45.34 per barrel, a 0.4% drop. Calculated on the basis of recent contracts, the monthly increase of New York crude oil in November was 26.7%.
The global benchmark Brent crude oil price in February fell by 37 cents on the Intercontinental Exchange’s European Futures Exchange, to $47.88 per barrel, a 0.8% drop. The price of Brent crude oil expiring in January fell 59 cents to $47.59 per barrel, or 1.2%.
The OPEC meeting held on Monday has ended without an official decision. However, there are reports that some oil-producing countries have reached a comprehensive agreement to extend the current production limit agreement for three months.
According to reports, OPEC+ will announce a final agreement on Tuesday. According to a report by Reuters, citing Algeria’s National News Agency, Algeria’s Energy Minister Abdelmadjid Attar said on Monday that OPEC member states have reached an agreement to extend the current 7.7 million barrels per day production cut for three months from January. Minister Attar is an OPEC conference chairman.
“An extension of 3 months or less would probably be viewed as a disappointment because it likely is not enough time for COVID-19 infection data to offer hopeful news,” Attar said. “An extension of 6 months or more is probably a positive, and something in the 4 [to] 5-month range is in my opinion somewhat neutral.”
OPEC agreed in April to cut production by 9.7 million barrels per day, and then in August, it reduced production to 7.7 million barrels per day. According to existing plans, OPEC will increase its daily output by another 2 million barrels in January next year.
In his opening speech at the OPEC meeting on Monday, Minister Attar pointed out that the COVID-19 pandemic is still a “great challenge.”
This year, global oil demand is expected to decrease by about 9.8 million barrels per day. However, Minister Attar said that oil demand growth in 2021 is expected to be very high, reaching 6.1 million barrels per day. The brighter outlook for 2021 keeps investors cautiously optimistic.
Peter McNally, head of the global department of Third Bridge, commented in an email that the problems facing OPEC have not changed, and the organization continues to weigh “how much oil to add to the market and whether it meets production targets.”
“Getting more than 20 countries to agree on the precise timing and amounts of additional oil is the challenge,” he said. Experts at Third Bridge believe the world needs more oil from OPEC members, but the “timing is tricky given the seasonal and cyclical factors impacting demand.”
Crude oil prices rose in December because the market is optimistic about candidate vaccines, which have shown great potential to prevent COVID-19 infection in later trials. At the same time, investors are struggling to cope with the increasing number of new coronavirus cases in the United States and Europe, as well as the possible increase in U.S. cases after the Thanksgiving holiday.
Among other commodities traded in the market, December gasoline fell 2.6% to $1.2489 per gallon, and the contract price of recent months rose 19% that month. Heating oil for December closed at $1.3559 per gallon, down 1.8% that day, but the increase in the month was more than 25%.
At the same time, the price of natural gas in January rose 1.4% against the trend of energy peers, and the settlement price was $2,882 per million British thermal units, which is still down by about 14% this month.