Oil Rises Towards $50 After OPEC+ Deal

(Bloomberg) -- Oil extended gains toward $50 a barrel after OPEC+ reached a compromise deal to gradually taper production cuts, ending days of uncertainty after cracks emerged in the alliance earlier in the week.
Futures surged 1.9% in London after closing at the highest level in nine months on Thursday. The group will start adding 500,000 barrels a day of crude to the market in January, with ministers holding monthly meetings to decide on the next steps. The deal avoided a breakdown of OPEC+ unity after a tense split between Saudi Arabia and the United Arab Emirates.
The oil futures curve, meanwhile, is signaling tighter supply and a brighter long term outlook. The prompt timespread for global benchmark Brent crude moved further into backwardation, while the nearest December contract is trading at a higher level than the same contract for December 2022.
The OPEC+ deal -- agreed after almost a week of fraught negotiations -- offers something to those members concerned about the fragility of the market, and also to nations wanting to pump more to take advantage of higher prices. Oil has rallied recently on optimism fuel demand will start to rebound once Covid-19 vaccines are widely distributed.
“The market is happy there was a decision by OPEC+ to move cautiously and in small steps,” said Victor Shum, vice president of energy consulting at IHS Markit. “It sounds like a reasonable move given the uncertainty ahead. The enduring fact is that as oil prices rise, the willingness to restrain supply withers.”
Prices |
|
Prior to the OPEC+ meeting, market watchers were expecting the alliance to delay the easing of planned output cuts by three months. Adjustments to the tapering can be in any direction, with a potential decision based on all factors, both negative and positive, Russian Deputy Prime Minister Alexander Novak said after the meeting on Thursday.
The deal will still allow for the oil market to remain in deficit throughout the first quarter of next year, according to TD Securities. There should be a steady and sustainable rally in prices through 2021 with OPEC+ exiting its production cuts in a coordinated way, Goldman Sachs Group Inc. said in a note.
“Energy markets are embracing OPEC+’s decision to ease up production cuts,” said Edward Moya, a senior market analyst at Oanda. “There’s uncertainty but also good reason to be optimistic for the demand outlook toward the later part of the first quarter.”
Adding to positive sentiment are signs that the U.S. may be closing in on new stimulus to boost the pandemic-hit economy ahead of a vaccine rollout. The global demand recovery is uneven, with the U.S. and Europe grappling with a resurgent coronavirus, while parts of Asia rebound strongly.
© 2020 Bloomberg L.P.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- USA Oil and Gas Employs Almost 1 Million in 2022
- US Could 'Steal' Green Energy Investments From Other Regions
- New Discoveries Make 2022 Highest Value Year In Over A Decade
- BofA Global Research Talks OPEC+ Meeting
- RRC Issues Weather Notice to Oil and Gas Groups
- BP's 2023 Energy Outlook Looks At Key Trends For Energy Transition
- Eni Pens $8 Billion Gas Deal With Libya's NOC
- Brent, WTI Net Length Continues to Build
- Exxon Beats Estimates, Posts Record $56B 2022 Profit
- Cnooc's $3B UK Portfolio Sale Has Stalled on Valuation Gap
- Is The USA Strategic Petroleum Reserve Stock Dangerously Low?
- Top Headlines: Valaris Employee Reported Missing from Rig
- What Bad Habits Should Oil and Gas Jobseekers Avoid?
- Police to Board Valaris Rig After Worker Reported Missing
- Big Oil Saw Record $199Bn Profits In 2022 But 2023 Will Be Different
- Governor Issues Disaster Declaration for Southeast Texas
- Risk Premium Embedded in USA NatGas Vanishes
- Offshore Rigs Set For Very Busy Year In 2023
- Norwegian Tax Break Ensures Increase Of O&G Supply To Europe
- World Still Waiting to See What China Reopening Means
- Valaris Employee Reported Missing from Rig
- Louisiana, Texas To Gain Thousands of Energy Jobs At Start of 2023
- Where Will WTI Oil Price Be at End 2023?
- Is the USA Shale Boom Over?
- Gasoline and Diesel Prices Expected to Fall
- Higher Oil Prices Have Not Led to More Exploration
- Shell Finds Gas In Pensacola High-Impact Well Off UK
- Talos Makes Two Commercial Discoveries In Gulf Of Mexico
- Iran Oil Gushes Into Global Market
- Will Oil Hit $100 Per Barrel in 2023?