Oil drops as OPEC+ resume talks on output cut extension after impasse
Oil prices fell on Thursday as producers including Saudi Arabia and Russia locked horns over the need to extend record production cuts set in place in the first wave of the Covid-19 pandemic.
Brent crude was down 15 cents, or 0.3%, at $48.10 a barrel by 0155 GMT, after gaining 1.8% on Wednesday. U.S. oil was down 17 cents, or 0.4%, at $45.11 a barrel, having ended 1.6% higher the previous session.
The Organization of the Petroleum Exporting Countries (OPEC) and Russia are resuming discussions on Thursday to agree on policies for 2021 after earlier talks produced no compromise on how to tackle weak oil demand amid a new coronavirus wave.
OPEC and allies, in the group known as OPEC+, had been widely expected to roll over oil cuts of 7.7 million barrels per day, or 8 percent of global supplies, at least until March 2021.
But after hopes for a speedy approval of anti-virus vaccines spurred a rally in oil prices at the end of November, some producers questioned the need to tighten oil policy, which is supported by OPEC leader Saudi Arabia.
OPEC and allies agree to gradually increase production after days of discussions
OPEC and non-OPEC allies, after days of tense discussions, agreed on Thursday to increase production by 500,000 barrels per day beginning in January. This will bring the total production cuts at the start of 2021 to 7.2 million bpd.
Ahead of the meeting, OPEC and its partners, known collectively as OPEC+, were widely expected to extend the current production cut of 7.7 million bpd through at least March. Talks were suspended on Tuesday after it became clear they were unable to reach a compromise.
Oil ministers from the 23-member group, which is composed of some of the world’s largest crude producers, kicked off their meeting around 10 a.m. ET, following a several-hour delay.
“500,000 bpd from January is not the nightmare scenario that the market feared, but it is not what was really expected weeks ago,” said Rystad Energy senior oil markets analyst Paola Rodriguez Masiu. “Markets are now reacting positively and prices are recording a small increase as 500,000 of extra supply is not deadly for balances,” she added.
Following the meeting, international benchmark Brent crude futures traded 1.4% higher at $48.92 per barrel, while U.S. West Texas Intermediate futures settled 36 cents, or 0.8%, higher at $45.64 per barrel.
Reference: CNBC
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