Oil held steady in New York, with OPEC and its partners engaging in a diplomatic push to agree on output levels before a key meeting on Thursday.
Futures were little changed after fluctuating between gains and losses. The Organization of Petroleum Exporting Countries is working to gain consensus on a deal to delay a planned increase in production as the global market recovery remains fragile. Members need to thrash out a compromise before gathering for the meeting, which was postponed from Tuesday because of disagreements.
Meanwhile, the American Petroleum Institute reported that U.S. crude inventories rose by 4.15 million barrels last week, according to people familiar with the data. Expanding stockpiles, strong demand in Asia and a suddenly resurgent North Sea market highlight the problems faced by OPEC and its allies as they consider whether a bifurcated market can handle more supply.
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There have been renewed signs of underlying strength in the market over the past 24 hours, with the nearest timespread moving into a bullish backwardation structure that indicates tight supplies. Physical markets are looking healthier, with around 20 tankers laden with U.S. crude set to leave for Asia this month and key North Sea swaps markets surging in recent days.
Most OPEC nations at an online session on Monday favored deferring the 1.9 million-barrel daily supply increase due to take effect in January by three months. But the United Arab Emirates pushed back, insisting on stringent conditions, delegates said.
“The market is pricing in a solution that will not see extra barrels hit the market during the early part of 2021,” said Ole Hansen, head of commodities strategy at Saxo Bank. It appears that “OPEC+ will not shoot themselves in the foot so close to an expected pickup in demand.”
Nevertheless, the oil market could be underestimating the bearish implications of the delay in the OPEC+ talks, consultant FGE wrote in a report. If there’s no agreement, stockpiles would rise early next year and lead to a very bearish market, FGE said.
– Bloomberg