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Oil Holds Steady Before OPEC+ Meets to Assess State of Market

(Bloomberg) — Oil held near $41 a barrel in New York before OPEC+ meets to assess the market as demand again comes under pressure from a resurgent coronavirus.OPEC+’s Joint Ministerial Monitoring Committee, which reviews compliance with the group’s pledged output cuts, will meet online Monday. While no supply decisions are expected until the conclusion of a two-day gathering on Dec. 1, leading members Saudi Arabia and Russia have stepped up diplomacy in recent days.Ministers are meeting against a backdrop of uneven oil demand. For months now, the recovery in consumption has been driven largely by China, whose economic expansion showed signs of broadening in September. Yet other countries are still clawing their way out of the slump, with fresh outbreaks of Covid-19 in Europe and the U.S. weighing on energy use.With uncertainty dominating, crude has struggled to break far from $40. While there was renewed optimism about a stimulus deal in the U.S. on Monday, the International Energy Agency last week said the outlook for oil remains fragile as the pandemic persists. Meanwhile, OPEC member Libya is ramping up production, leaving OPEC+ treading a fine line as it decides whether to add more supply.Russian President Vladimir Putin and Saudi Crown Prince Mohammed Bin Salman have spoken twice by phone in the past week, suggesting “the plans of OPEC and its allies are soon likely to be closely reviewed,” said Commerzbank AG Head of Commodities Research Eugen Weinberg. “The fundamental situation on the oil market is certainly cause for concern, with ongoing demand weakness on the one hand and rising production on the other.”Though virus restrictions are mounting, in the short-term there are some signs of tighter markets. Brent’s nearest futures contract ended last week at its smallest discount to the next month since July, indicating easing concerns about oversupply. That comes as one Chinese buyer purchases large amounts of crude for a refinery expansion, while data show that Chinese refiners processed about 13.5 million barrels a day for a fourth month in September.If market uncertainty persists through next month, OPEC+ will probably decide to bring back less supply than the planned 1.9 million barrels a day in January, Citigroup Inc. analyst Ed Morse wrote in a report. On Friday, JPMorgan Chase & Co. said the group may choose to defer its output taper by one quarter.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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