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Oil futures finished lower on Monday after the Organization of the Petroleum Exporting Countries and its allies failed to reach an agreement on production policy and said they would reconvene their meeting on Tuesday.
The majority of the group of producers, known as OPEC+, favor a rollover of current output levels, but Russia and Kazakhstan want to see an increase of 500,000 barrels per day in February, according to a tweet from Amena Bakr, deputy bureau chief and chief OPEC correspondent at Energy Intelligence.
After failing to reach a consensus, OPEC+ announced that its meeting adjourned Monday and would resume Tuesday at 3:30 p.m. Vienna time (9:30 am Eastern).
In opening remarks to the OPEC and non-OPEC ministerial meeting on Monday, Saudi energy minister Prince Abdulaziz bin Salman said that while the vaccines were a “very welcome sign” for the oil market, OPEC and its nonmember allies must be cautious as global demand remains very short of where it was at the beginning of 2020, and the new variant of the virus is an “unpredictable” development.
An earlier meeting of the Joint Ministerial Monitoring Committee ended with no final recommendation on what production policy should be followed, according to a tweet from Bakr, citing comments from delegates.
West Texas Intermediate crude for February delivery CL.1, -2.51% CLG21, -2.51% fell 90 cents, or nearly 1.9%, to settle at $47.62 a barrel on the New York Mercantile Exchange. March Brent crude BRNH21, -0.78%, the global benchmark, declined by 71 cents, or 1.4%, at $51.09 a barrel on ICE Futures Europe.
“We believe that in the current environment, where there are real concerns over the latest waves of COVID-19, the best route for OPEC+ to take is to keep output cuts unchanged at current levels,” said Warren Patterson, head of commodities strategy at ING, in a note.
“Despite the strength in the flat price and spreads, the market is still clearly vulnerable, and adding further supply risks a pullback in prices,” he wrote.
OPEC+ in December voted to relax curbs by 500,000 barrels a day beginning on Jan. 1 to 7.2 million barrels a day. Members are expected to reach an agreement on whether to keep, reduce or increase production.
Meanwhile, the U.S. saw at least 201,476 new COVID-19 cases on Sunday, and at least 1,353 people died, according to a New York Times tracker. In the last week, the U.S. has averaged 212,893 cases a day, down 1% from the average two weeks ago. Analysts note that numbers are often undercounted at the weekend because staffing at many centers is reduced. There are currently a record 125,544 COVID-19 patients in U.S. hospitals, according to the COVID Tracking Project, breaking the record set on Dec. 31.
The rollout of vaccines in the U.S. fell significantly behind schedule. The Trump administration had set a goal of administering 20 million doses of the vaccine before the end of 2020. In the end, fewer than 2.8 million doses had been administered as of Dec. 31, according to the CDC.
“It will take time for vaccine distribution to have a positive impact on oil demand, and the near-term outlook for demand remains precarious,” said Stacey Morris, director of research at Alerian.
“The potential impact of the spreading COVID-19 variant is likely to be more meaningful for oil demand in the first quarter than vaccine deployment,” she told MarketWatch. Still, “as vaccines become more widely available to the general public, that should help support a broader return to economic activity and transportation trends similar to pre-COVID levels.”
Market bulls had momentum on their side to end the year. WTI saw a 7% rise in December, contributing to a gain of more than 20% for the fourth quarter, according to Dow Jones Market Data. Brent crude rose 8.9% in December and 26.5% in the final quarter of the year.
That still left crude prices down significantly for 2020 after demand was crushed by the COVID-19 pandemic. WTI ended 2020 down 20.5%, while Brent crude declined 21.5%.
On Nymex Monday, February gasoline RBG21, -3.21% lost 2.6% to $1.3729 a gallon and February heating oil HOG21, -1.92% shed 1.5% to $1.462 a gallon.
February natural gas NGG21, +2.64% rose by nearly 1.7% to $2.581 per million British thermal units.
