OIL FUTURES: Oil price declines extend amid OPEC+ uncertainty, COVID-19 spread

Oil prices retreated Dec. 1 amid uncertainty surrounding an expected extension of OPEC+ production quotas after the group delayed its meeting to Dec. 3.

NYMEX January WTI settled 79 cents lower at $44.55/b, and ICE February Brent fell 46 cents to $47.42/b.

OPEC is hoping a couple of days away from the market's glare will allow cooler heads to prevail and rescue a deal to extend production cuts that analysts say is needed to prevent an oil glut in the months ahead.

Disagreements—at times vehement, according to sources—between Saudi Arabia and the UAE over how quotas will be managed and enforced led to a breakdown of formal OPEC talks on Nov. 30, and a meeting with Russia and other partners scheduled for Dec. 1 has now been pushed back by two days.

"The latest spat between Saudi Arabia and the UAE raises the risk of taking the energy market off the path towards rebalancing," OANDA senior market analyst Edward Moya said in a note. "The UAE resistance to delaying the output hike was not expected and will likely force OPEC+ to have production discussions become a monthly event."

NYMEX January RBOB settled 2.12 cents lower at $1.2204/gal, and January ULSD was down 2.41 cents at $1.3473/gal.

OPEC delegates had said the framework of a three-month extension favored by kingpin Saudi Arabia and several other members had been reached, but a deal has been held up by the UAE's insistence that quota-busting countries be held to account with so-called compensation cuts that have to date been largely unenforced, except on itself.

Without an extension agreement, the OPEC+ curbs are scheduled to ease from the current 7.7 million b/d to 5.8 million b/d from January, which many analysts have said could overwhelm the market given the recent surge in crude production from quota-exempt Libya.

More US lockdowns loom

Demand outlooks remain under pressure from the threat of renewed lockdowns as COVID-19 continued to surge across the US.

California Governor Gavin Newsom warned Nov. 30 he may need to take "drastic actions," including issuing stay-at-home orders, to curb swelling cases numbers

In New York, Governor Andrew Cuomo on Nov. 30 ordered hospitals to take emergency precautions in the face of rising cases loads and suggested the state could again implement lockdown measures similar to those this past spring.

Second-month RBOB futures settled Dec. 1 at a 1.22 cent/gal premium to the front-month contract, opening the first significant contango in that part of the forward curve since June 30. In contrast, the second-month RBOB settled in a 5.30 cent/gal backwardation compared with front month on the same date in 2019.