Oil rose for a fourth straight week on Friday, buoyed by optimism over COVID-19 vaccine progress ahead of an OPEC+ ministerial gathering next week.
Futures in New York advanced more than 7 percent this week, despite edging lower on Friday.
The shape of the oil futures curve firmed over recent sessions with some nearer-dated futures contracts rising above later-dated ones. It is a sign of how the market has dramatically repriced the increased likelihood of a vaccine rollout jump-starting a stronger demand rebound next year.
Photo: Reuters
Informal talks between an OPEC+ panel is to take place today after previously being scheduled for yesterday.
That would precede the formal ministerial meetings scheduled for tomorrow and Tuesday, when producers are to decide whether to postpone a planned output hike.
West Texas Intermediate for December delivery on Friday fell 0.4 percent to US$45.53 per barrel, up 7.3 percent for the week.
Brent crude for December delivery on Friday rose 0.8 percent to US$48.18 per barrel, gaining 6.9 percent weekly.
“With three vaccine candidates at least close to deployment, a material recovery in economic activity and oil consumption in the next six months is on the horizon,” said Erduan Reid, head of crude swaps at Eagle Commodities Ltd in London.
If OPEC+ extends its current output cuts, “most balance estimates assume a first-quarter 2021 global draw driven by Asia, even if Europe and the US build on mobility restrictions,” he said.
While most analysts surveyed by Bloomberg are forecasting that OPEC+ would postpone the planned increase by three months to March, oil’s recent rally might further complicate the decision amid growing tension with some member countries.
Meanwhile, Algeria, which holds the rotating OPEC presidency this year, said the group must remain cautious, because the organization’s internal data point to the risk of a new oil surplus emerging next year.
That is if the cartel and its allies go ahead with a supply hike.
“Some of OPEC’s members like the UAE and Iraq have expressed misgivings around the course of supply policy, and in part, we view this early meeting as a means to keep them in the OPEC+ fold and maintain group cohesion” BNP Paribas SA head of commodity markets strategy Harry Tchilinguirian said.
“If the news that filters out over the weekend leans towards OPEC+ considering a delay to the tapering of its cuts, then we are likely to see the oil market continuing its advance,” he said.
The OPEC+ alliance’s agreement is expected to be in place throughout next year and the group would delay its planned tapering by three months, JPMorgan Chase & Co analysts, including Natasha Kaneva, wrote in a report.
The bank has said inventories would decline by 1.2 million barrels a day on average next year, although demand still would not reach normal levels until 2022.
Alongside strong demand from Asia, there are signs that consumption is also gradually improving elsewhere.
Foot traffic in US airports hit the highest since March before the Thanksgiving holiday, although it remains about 1.5 million people lower year-on-year, US Transportation Security Administration data showed.
Still, in the near term, there is the lingering threat of further lockdown measures due to the pandemic.
Additional reporting by staff writer
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