Oil Rally Stalls Amid OPEC+ Tensions

(Bloomberg) -- Brent oil edged lower -- but was on track for a fourth weekly gain -- amid signs of division among OPEC+ members just days before a key policy meeting on whether to extend production curbs.

Futures in London traded near $48 a barrel after falling 1.7% in the previous session. West Texas Intermediate dropped 2% from Wednesday, with prices not closing on Thursday due to the Thanksgiving holiday in the U.S.

While most analysts surveyed by Bloomberg are forecasting OPEC+ will postpone a planned supply hike by three months to March at a meeting early next week, some see a chance of a shorter delay amid resistance from the United Arab Emirates and Iraq, which are eager to resume oil sales.

OPEC’s president said the group must remain cautious, with internal data pointing to the risk of a new surplus early next year if output is hiked in January. That came after Iraq’s deputy leader criticized the cartel, saying the economic and political conditions of member countries should be considered before they are asked to withhold production. The recent rally gives leverage to members who want to pump more, Standard Chartered Plc said in a note.

Crude is up around 6% this week as signs Covid-19 vaccines could soon be rolled out brighten the consumption outlook, even as a resurgent virus led to more lockdown measures, particularly in Europe. There was also fresh evidence the demand recovery in Asia is gaining traction. Chinese industrial profits rose at the fastest pace in almost nine years in October, while Indian economic growth data due Friday is forecast to show a sharp recovery last quarter.

“At this stage it looks like we are looking at a pullback in an uptrend,” said Michael McCarthy, chief market strategist at CMC Markets. It’s “almost certain” there will be some form of OPEC+ agreement, but the meeting is possibly less influential than it might have been given the focus on demand, he said.

Brent is up 27% this month, with the global benchmark closing at overbought levels on Wednesday, a sign that a possible reversal had been on the cards. Several key oil timespreads have flipped to backwardation this week, a bullish signal where near-dated prices are more expensive than later-dated ones.

Industrial action in Norway, meanwhile, could threaten some oil and gas production. If a long running safety guard strike isn’t resolved before the weekend, two of the country’s fields may have to stop flows.

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