Oil prices tumbled on Monday on uncertainty about whether OPEC+ would agree to extend large output cuts at talks this week, but vaccine hopes still kept benchmark crudes on track to rise more than a fifth in November.
Brent crude for January delivery, a contract that expires on Monday, dropped 90 cents, or 1.9%, to $47.28 a barrel by 0944 GMT. The more actively traded February Brent contract was down 89 cents at $47.36.
U.S. West Texas Intermediate crude for January fell 70 cents, or 1.5%, to $44.83 a barrel.
“Last week’s optimism is taking a hit this morning and longs are edging towards the exit ahead of the OPEC+ talks,” said oil broker PVM’s Tamas Varga, after OPEC+ failed to agree on policy in informal talks ahead of Monday and Tuesday’s formal meetings.
“Some member countries will be hard to convince about further output discipline and in case of an unexpected fallout not only the price repercussions will hurt producers, but the general existence of the OPEC alliance will be questioned.”
Members of the Organization of the Petroleum Exporting Countries, Russia and others, a group known as OPEC+, will consider extending existing cuts for three to four months or increasing output gradually from January, OPEC+ sources said.
OPEC+ had been due to ease its existing production cuts by 2 million barrels per day (bpd) from January.
Hussein Sayed, analyst at FXTM, said fuel demand had recovered in Asia but not in Europe and the Americas, presenting OPEC+ with a “challenging choice on whether to delay or bring back more oil to the market.”
Goldman Sachs said the surge in COVID-19 cases in the winter would not prevent the oil market rebalancing as a result of vaccine progress, saying it saw Brent rising to $65 in 2021.
Brent and WTI are still set to rise more than 20% in November, the strongest monthly gains since May, boosted by hopes that three promising vaccines could support economic recovery and lift fuel demand.
Supporting the demand outlook, China expanded factory activity at its fastest in more than three years in November.