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Oil futures finished Monday with a modest loss, failing to find much support as an OPEC+ committee reiterated its commitment to output cuts and said it “encouraged” some producers to fully compensate for production above their quotas.
Prices had briefly moved higher shortly after Saudi Arabia’s energy minister said OPEC+ will do “what is necessary” to rebalance the oil market.
Oil traders also monitored accelerating COVID-19 infections in the U.S. and Europe and the potential loss of energy demand, adding pressure to prices.
Saudi Energy Minister Prince Abdulaziz bin Salman on Monday said that the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, has shown that it has the “flexibility” to adapt to changes in the oil market and will “do what is necessary in the interest of all.”
OPEC+ must comply with three key principles: “predict, prevent and be proactive” in the oil market, said Prince Abdulaziz, in his opening statement for the Joint Ministerial Monitoring Committee virtual meeting. The group must base decisions on the best available data and information, and always be forward looking in its decision making, he said.
He acknowledged, however, that OPEC+ still has work to do to get certain countries to fully compensate for past overproduction.
In a statement provided after a closed-session meeting, the JMMC reiterated their commitment to the production-cut agreement and said it “encouraged” participating countries to increase efforts to compensate for “overproduced volumes” to rebalance the market.
The committee isn’t a decision-making body, but offers recommendations to OPEC on how to best balance the market. The next JMMC meeting will be held on Nov. 17, and the OPEC conference and OPEC+ meetings will be held on Nov. 30 and Dec. 1.
West Texas Intermediate crude for November delivery CLX20, -0.73% CL.1, -0.73%, the front-month contract, fell by 5 cents, or 0.1%, to settle at $40.83 a barrel. The November contract expires at the end of Tuesday’s session. The most-active December WTI contract CLZ20, -0.77% lost 6 cents, or nearly 0.2%, to $41.06 a barrel on the New York Mercantile Exchange.
December Brent crude BRN00, -0.54%, the global benchmark, fell 31 cents, or 0.7%, to $42.62 a barrel on ICE Futures Europe.
At the JMMC meeting, Russian Energy Minister Alexander Novak, through an interpreter, said the oil market is “seeing a lot of uncertainties in the market, which are preventing us to coming back to precrisis levels.” He also described current market conditions as a period of “extreme volatility.”
However, Russia hasn’t reached full compliance with its pledged output cuts. Russia produced 9.1 million barrels per day in September to reach 95% compliance with its production quota of 8.993 million barrels per day, an S&P Global Platts OPEC+ survey, released earlier this month, showed.
A renewed rise in the COVID-19 cases and a stalling recovery of demand has prompted calls for OPEC+ to scrap plans to ease output cuts from 7.7 million barrels a day to 5.8 million barrels a day on Jan. 1, said Warren Patterson, global head of commodities at ING, in a note.
But since the JMMC is made up of just a few OPEC+ members, “we will likely have to wait for the full group meetings on the 30 November and 1 December for any concrete decision,” he said, ahead of Monday’s OPEC+ committee meeting.
The global count of confirmed COVID-19 cases climbed above 40 million on Monday, according to data aggregated by Johns Hopkins University, while the death toll rose to 1.1 million. The number of new U.S. infections fell below 50,000, the lowest in nearly a week, as deaths neared 220,000 and moving averages suggested the spread is picking up steam, The Wall Street Journal reported.
Several European countries have moved to increase restrictions on activity as the number of infections have risen.
Meanwhile, Libya, which produced less than 100,000 barrels of crude per day on average between January and September, has increased its production to 500,000 barrels a day and exports to almost 400,000 barrels per day, said Eugen Weinberg, analyst at Commerzbank, in a note. Libya, an OPEC member, isn’t part of the OPEC+ agreement on production curbs.
“Production is also likely to see further dynamic growth when the country’s largest Sharara oil field reopens—currently, 110,000 barrels are being produced there per day, though the oil field has a total capacity of 300,000 barrels per day,” said Weinberg.
Rounding out action on Nymex Monday, November gasoline RBX20, -1.07% declined by 0.6% to $1.1623 a gallon and November heating oil HOX20, -2.34% lost 1.8% to $1.1581 a gallon. November natural gas NGX20, +2.66% added 0.8% to $2.795 per million British thermal units.
