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Oil prices changed little on Tuesday, as rising COVID infections and restrictions dampened hopes for a vaccine to quickly revive demand for oil.
Oil prices changed little on Tuesday as escalating COVID-19 infections and the return of lockdowns and restrictions in Europe and the United States overshadowed the rally in crude prices driven by vaccines on Monday.
Crude fell below $ 44 a barrel and the world benchmark Brent for January delivery lost seven cents to settle at $ 43.75 a barrel. US West Texas Intermediate for December delivery gained nine cents to settle at $ 41.43 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and its Russian-led allies held a meeting of a ministerial committee on Tuesday, but did not make any formal recommendation on changing quotas for next year.
The group, known as OPEC +, agreed to record oil cuts earlier this year when the pandemic destroyed global demand for crude, causing oil prices to fall in March and April.
Saudi Arabia, the OPEC kingpin and the world’s top oil exporter, urged other oil-producing nations to consider delaying a production boost of two million barrels per day (bpd), or 2 percent of the world demand, in January.
OPEC + currently agrees to cut 7.7 million bpd through January and then reduce the reduction to 5.7 million bpd. His ministerial meeting is scheduled for November 30.
“Maintaining the status quo would mean a very difficult start to 2021,” Louise Dickson, an analyst at Rystad Energy, told Al Jazeera.
Dickson added that extending the existing 7.7 million bpd cuts for another three months would balance the market but do very little to raise prices. And while a six-month extension is likely to support prices, there is a stinger in the tail.
“That’s a double-edged sword because if prices improve, other players will take back supply,” said Dickson.
Oil-producing nations are suffering from a budget contraction, including Saudi Arabia, which the IMF estimated needs crude to reach more than $ 78 a barrel to balance its budget this year and just shy of $ 68 a barrel next.
“We, as a group, do not want to give the markets any excuse to react negatively,” Saudi Energy Minister Prince Abdulaziz bin Salman said at the start of the OPEC + meeting on Tuesday.
Russia has been slow to say whether it will agree to extend the cuts. While Moscow has indicated that it will honor its commitment under the current OPEC + deal, it has also said that the market has reached stability.
Oil prices hit a 10-week high on Monday after Moderna said preliminary data from the trial of its COVID-19 vaccine showed it to be 94.5 percent effective. It was the second dose of positive vaccine news in as many weeks, following promising trial results from Pfizer and BioNTech’s COVID-19 vaccine.
But analysts cautioned that today’s good vaccine news doesn’t mean a recovery in demand tomorrow, next week, or even next month.
A street vendor wearing a protective mask blows bubbles from a toy across the street from CityMD Jamaica Urgent Care in the Queens borough of New York, USA. [File: Shannon Stapleton/Reuters]
“We still have a way to go and the Saudis recognize it,” Samantha Gross, an energy and climate fellow at the Brookings Institution, told Al Jazeera.
“The vaccine news is good, but we are seeing a resurgence in the [United] The United States and Europe, and that tells us that demand is not coming back quickly. Prices may bounce a bit on vaccine news, but they will drop again when people realize that it won’t fix the problem right away. “
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