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Crude buoyant on hopes of extension to OPEC production cuts

London — 1320 GMT: Crude oil futures rose on Nov. 20, as optimism returned to the market over an anticipated extension to OPEC production cuts into 2021.

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At 1320 GMT, ICE January Brent crude futures were 34 cents/b higher than the Nov. 19 settle at $44.54/b, while the NYMEX December light sweet crude contract rose 27 cents/b cents/b to $42.90/b.

While the OPEC+ Joint Ministerial Monitoring Committee meeting on Nov. 17 did not agree a way forward, the group signaled that production cuts may be extended into 2021, which would help prevent oversupply in global oil markets, said analysts at Commerzbank in a note on Nov. 20.

"It seems that the market is in a holding pattern, with participants just waiting to see what OPEC+ finally decides," Warren Patterson, head of commodities strategy at ING, told S&P Global Platts Nov. 20.

Markets will have a clearer view of the way forward when the full OPEC body meets on Nov. 30 and Dec. 1, in order to thrash out an agreement on the way forward.

"I think OPEC+ backstops effectively bookend the market on the downside. While this had been unofficially discussed for weeks and the market had been leaning on this backstop, it was nonetheless positive to get confirmation that an extension is factually being considered. With the rise in coronavirus infections and new mobility restrictions, it seems like a rubber stamp kind of likely that an extension will be needed to support sentiment, tighten the market, and avoid a pullback in oil prices," Stephen Innes, chief global markets strategist at Axi, said in a note on Nov. 20.

"There is no doubt that the market is now looking forward to the OPEC and non-OPEC Ministerial Meeting for clarity over the alliance's production plan going forward." David Lennox, analyst at Fat Prophets told Platts on Nov. 20.

Upside in the crude oil markets is likely to remain capped, however, by concerns over surging coronavirus cases in the US, with California Governor Gavin Newsom announcing Nov. 19 that curfews would be imposed as the pandemic worsens in the state.

The measures will last from Nov. 21 until Dec. 21 and include limitations on social gatherings and non-essential activities outside the home. A sustained COVID-19 positivity rate of above 3% has also seen the closure of New York City schools, and Mayor Bill DeBlasio said at a Nov. 19 press appearance that further restrictions on indoor gatherings could be implemented.