Oil prices fell on Tuesday as concerns over mounting supply returned to the fore after leading producers delayed talks on 2021 output policy, while the coronavirus pandemic continues to sap fuel demand.
Brent crude was down by 35 cents, or 0.7% at $47.53 a barrel by 0722 GMT, after dropping more than 1% on Monday. West Texas Intermediate was down by 30 cents, or 0.7% at $45.04, having dropped 0.4% in the previous session.
Both contracts surged around 27% in November after COVID-19 vaccine developments raised hopes of an economic recovery that could revive fuel demand.
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OPEC+ delayed talks on output policy for next year until Thursday, three sources told Reuters, as key players still disagreed on how much oil they should pump amid weak demand.
The grouping, including the Organization of the Petroleum Exporting Countries (OPEC), Russia and other allies, had been scheduled to hold its meeting on Tuesday after discussions of key ministers on Sunday failed to reach a consensus.
“The group needs to extend the deal in order to ensure that the market continues to draw down inventories over the first quarter of next year,” ING Economics said in a note.
“Vaccine developments are unlikely to significantly change the demand outlook in the next couple of months,” ING added.
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Sources said the UAE had complicated the picture by signalling it would be willing to support a rollover of supply cuts only if group members’ compliance with cut commitments improved.
The group is due to ease current production cuts by 2 million barrels per day (bpd) from January, but with demand still under pressure from the pandemic, OPEC+ was considering extending current cuts into the first months of next year, a position backed by de facto OPEC leader Saudi Arabia, sources said.
A Reuters poll of 40 economists and analysts forecast Brent would average $49.35 a barrel next year, estimating that prices would have some trouble sustaining a rally.
By Chibisi Ohakah, with agency reports
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