Crude declines as OPEC+ punts on quota decision, UK tightens lockdown

Oil futures settled lower Jan. 4 as the OPEC+ group announced it would extend for a second day talks regarding February output hikes.

NYMEX February WTI settled 90 cents lower at $47.62/b and ICE March Brent was down 71 cents at $50.19/b.

OPEC and its partners will extend their talks to Jan. 5, with countries still at loggerheads over February production levels but hoping to avoid the brinkmanship of last spring when the pact briefly collapsed, crashing oil prices.

A full day of negotiations, including first a ministerial monitoring committee meeting, followed by the full OPEC+ conference, failed to budge Russia off its position that the coalition should increase crude production by 500,000 b/d in February to reclaim market share lost to the coronavirus pandemic.

Most members were in favor of rolling over January quotas, wary of the slow ramp-up of vaccines and the scrambling by many countries to get skyrocketing infection rates under control with renewed lockdown measures, delegates said.

The group's job of restoring oil markets is not finished, and members must "avoid the temptation to slacken off our cause," Saudi energy minister Prince Abdulaziz bin Salman said in his opening remarks.

"OPEC+ is dealing with a softer crude demand outlook to start the new year due to the highly anticipated post-holiday coronavirus spike," OANDA senior market analyst Ed Moya said in a note. "Vaccine rollouts have not been as successful for most of the world and that does not bode well for the case to hike oil production by another 500,000 b/d in February."

NYMEX February RBOB settled 3.72 cents lower at $1.3729/gal and February ULSD was down 2.2 cents at $1.4620/gal.

UK Prime Minister Boris Johnson on Jan. 4 announced a nationwide lockdown beginning at midnight local time. Restrictions include a broad stay-at-home order, closure of non-essential businesses, and limits on social gatherings.

The front month ICE New York Harbor RBOB crack versus Brent narrowed to 70 cents/b in afternoon trading, down from a 10-week high $7.65/b on Dec. 31.