Oil prices were slightly down early on Monday as an OPEC+ panel is meeting virtually to discuss the latest supply and demand developments, while underwhelming economic data from China and stricter measures to fight COVID-19 in Europe weighed on oil market sentiment.
As of 08:32 a.m. EDT on Monday, WTI Crude was down 0.20 percent at $40.78 and Brent Crude traded down 0.26 percent on the day at $42.81.
Prices held relatively steady in the morning as investors await the outcome of the monthly meeting of the Joint Ministerial Monitoring Committee (JMMC) at which several OPEC+ ministers are discussing the latest market developments amid speculation whether the group should proceed with easing the cuts as of January, considering that the second COVID-19 wave sweeping through Europe and threatening to derail economic and oil demand recovery. The JMMC panel is not expected to take any action, but comments during and after the meeting could swing oil prices in either direction.
“Given the JMMC is made up of just a handful of OPEC+ members, we will likely have to wait for the full group meetings on the 30 November and 1 December for any concrete decision, though that does not mean that there won’t be plenty of noise around what OPEC+ might do,” ING strategists Warren Patterson and Wenyu Yao said on Monday.
Economic data out of China was not constructive for oil prices today, as economic growth in the third quarter—while accelerating from Q2—missed analyst expectations.
“With prices stuck in the low $40’s and global coronavirus cases spiking again, the group - despite Russian wishes to increase production - needs to tread carefully. The potential for a U.S. relief package remains alive, but the impact, given rising coronavirus cases, may be limited. Brent is currently stuck in a $41.50/b to $43.50/b range,” John Hardy, Head of FX Strategy at Saxo Bank, said on Monday.
By Tsvetana Paraskova for Oilprice.com
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While the current fundamentals of the global oil market supported by China’s very positive economic data could easily support a Brent crude oil price of $45-$50 a barrel, lurking behind is the fear of a resurging COVID-19 pandemic.
OPEC+ should never be rushed into easing the cuts until the pandemic starts to ease significantly or until effective anti-COVID vaccines become available. Furthermore, easing the cuts is easy but reinstating them would be far more difficult than before.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London