Oil edged lower in New York, with OPEC and its partners engaging in a diplomatic push to agree on output levels before a key meeting on Thursday.
Cracks have recently appeared in the cartel’s cohesion, forcing it to push back a gathering with allies to later this week as they seek to thrash out a compromise.
The Organization of Petroleum Exporting Countries is working to gain consensus on a deal to delay a planned increase in production as the global market recovery remains fragile.
Meanwhile, the American Petroleum Institute reported that U.S. crude inventories rose by 4.15 million barrels last week, according to people familiar with the data.
Expanding stockpiles, strong demand in Asia and a suddenly resurgent North Sea market highlight the conflicting problems faced by OPEC+ as it considers whether a bifurcated market can handle more supply.
There have been renewed signs of underlying strength in the market this week, with Brent crude’s nearest price timespread briefly edging into a bullish backwardation structure that indicates tight supplies.
Physical markets are looking healthier, with around 20 tankers laden with U.S. crude set to leave for Asia this month and key North Sea swaps markets surging in recent days.
Most OPEC nations at an online session on Monday favored deferring the 1.9 million-barrel daily supply increase due to take effect in January by three months. But the United Arab Emirates pushed back, insisting on stringent conditions, delegates said.
“The market is pricing in a solution that will not see extra barrels hit the market during the early part of 2021,” said Ole Hansen, head of commodities strategy at Saxo Bank. It appears that “OPEC+ will not shoot themselves in the foot so close to an expected pickup in demand.”
West Texas Intermediate for January delivery slipped 18 cents to $44.37 a barrel as of 8:37 a.m. in New York
Brent for February settlement fell 16 cents to $47.26
Nevertheless, the oil market could be underestimating the bearish implications of the delay in the OPEC+ talks, consultant FGE wrote in a report. If there’s no agreement, stockpiles would rise early next year and lead to a very bearish market, FGE said.