Oil prices slip as producers delay output policy talks

Tokyo — Oil prices slipped on Tuesday amid concerns over mounting supply after leading producers delayed talks on 2021 output policy that could extend production cuts as the coronavirus pandemic continues to sap fuel demand.

Opening trading for December Brent crude was down 20c, or 0.4% at $47.68 a barrel by 1.36am GMT, after dropping more than 1% on Monday. West Texas Intermediate was down by 27c, or 0.6% at $45.07 a barrel, having dropped 0.4% in the previous session.

Still, both contracts surged 27% in November, the biggest monthly gains since March after Covid-19 vaccine developments raised hopes of an economic recovery that could boost fuel demand.

The Organisation of the Petroleum Exporting Countries (Opec) delayed talks on output policy for next year until Thursday, three sources said, as players were still in disagreement on how much oil they should pump amid weak demand. The grouping had been scheduled to hold its meeting on Tuesday after discussions of ministers on Sunday failed to reach a consensus.

“I suspect that, ultimately, Opec will extend the production cut programme by three months,” said Bob Yawger, director of energy futures at Mizuho Securities. But any accord would require producers to agree to larger cuts, with those barrels being allocated to the United Arab Emirates (UAE) “for the balance of the agreement”, he said.

Sources said the UAE had complicated the picture by signalling it would be willing to support a rollover of supply cuts only if group members’ compliance with cut commitments improved.

The group is due to ease current production cuts by 2-million barrels a day from January, but with demand still under pressure from the pandemic, Opec was considering extending current cuts into the first months of next year, a position backed by de facto Opec leader Saudi Arabia, sources said.

A Reuters poll of 40 economists and analysts forecast Brent would average $49.35 a barrel next year, estimating that prices would have trouble sustaining a rally.

Reuters