Oil prices stabilize as OPEC+ discusses keeping output curbed

(Bloomberg) --Oil clawed back earlier losses amid signals that a key OPEC ally is in discussions about possibly postponing the group’s planned output hike in January.

Futures were higher in New York, after earlier falling to a five-month low. Discussions between Russian oil companies and Energy Minister Alexander Novak over the possibility of delaying a planned OPEC+ output bolster optimism the group won’t add more supply than the market can absorb as Europe enters a new round of lockdowns. At the same time, China increased the 2021 private-firms import quota by more than 20% compared to this year, presenting a bright spot for an otherwise precarious demand picture.

Uneven global demand and a looming U.S. election is “creating overall uncertainty,” said Gary Cunningham, director of account management and research at Tradition Energy. Yet, the discussions in Russia show “a willingness by the OPEC+ conglomerate to help support the market.”

Futures had earlier come under pressure from the double whammy of rising Libyan supply and a dwindling demand outlook as England joined the string of European countries to renew lockdowns. That could be just the curtain-raiser for a turbulent week of trading as Americans head to the polls Tuesday in an election that could reshape U.S. policy on everything from fiscal stimulus to Iran and fracking.

OPEC+ faces an increasingly complicated decision on whether to add more supply to the market when the group meets at the end of the month. New threats to the fragile demand recovery coupled with fresh supply have spurred oil futures to take back their meager summer gains. The second wave of the virus around the world could push global oil demand to as low 88 to 89 million barrels a day, down 11% or 12% from last year, Trafigura Group boss Jeremy Weir said at a conference.

“Positive supply developments in Libya will only raise the probability that the OPEC+ group will explicitly consider a delay to the taper of its planned voluntary output cuts,” said BNP Paribas oil strategist Harry Tchilinguirian.

Prices:

• West Texas Intermediate for December delivery rose 29 cents to $36.08 a barrel as of 10:31 a.m. in New York
• Brent for January settlement gained 42 cents to $38.36 a barrel

Despite the recent price weakness, Vitol Group, the world’s biggest independent oil trader, characterized the latest lockdown measures as just a “speed bump,” with tightening global inventories likely to cushion the downside. The bigger picture is still a world in “stock-drawing mode,” Mike Muller, Vitol’s head of Asia, said in an interview Sunday with Dubai-based consultants Gulf Intelligence.

That view was backed up by figures from India over the weekend, where diesel sales grew for the first time in eight months. The country also posted bumper manufacturing data on Monday, while figures from China showed an expansion too, indicating Asian demand growth continues to outpace the rest of the world.

Other oil-market news:

• Equinor ASA has extended its net-zero climate pledge to now include emissions from its products by 2050 while also targeting increased oil and gas output.
• Russia kept its oil production in October nearly unchanged amid a second wave of the coronavirus pandemic in the U.S. and Europe crushing hopes of a speedy recovery in global crude demand.
• Global oil demand will peak at 102m b/d in 2028, down from the previous estimate of 106m b/d in 2030, according to Rystad Energy.