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OIL FUTURES: Oil pulls back as OPEC punts on production cut extensions

Highlights

OPEC meeting adjourns without deal

Kazakhs want curbs rolled back, UAE undecided

Brent contango deepens

New York — Oil futures settled lower Nov. 30 as OPEC delegates finished a first day of negotiations without a deal on whether to extend crude production quotas into the new year.

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NYMEX January WTI settled 19 cents lower at $45.34/b, and ICE January Brent finished the session down 59 cents at $47.59/b.

The OPEC+ alliance at one point seemed close to a decision to maintain its collective 7.7 million b/d in output cuts through at least March to buttress oil prices against the impact of rising COVID-19 infections, but fissures have emerged as fatigue among many countries to rein in so much of their crude production has grown, and talks so far have failed to achieve a watertight consensus.

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NYMEX December RBOB settled 3.31 cents lower Nov. 30 at $1.2489/gal, and December ULSD was down 2.46 cents at $1.3559/gal.

Year-ahead WTI futures settled in a 2 cents/b backwardation compared with the front-month contract, but Brent forward curve fell deeper into contango with the year-ahead contract settling at a 45 cent/b premium to front month.

No OPEC deal

OPEC held its formal meeting Nov. 30, intending to clinch a deal ministers would then hammer out the following day with its nine non-OPEC partners. Delegates said the framework of a cut extension for three months had been reached, but the UAE, which has been wavering in its commitment to OPEC, has yet to take a position, endangering the negotiations.

"It is becoming apparent that you are not having everyone fall in line here, and rightfully so; the Asian economic recovery is strong," OANDA senior market analyst Edward Moya said. "If the recovery continues like it is, [a quota extension] is basically giving US shale producers the greenlight to win back market share."

Chinese refinery runs hit a fresh all-time high of 14.15 million b/d in October, National Bureau of Statistics data showed Nov. 25.

Even an agreement among OPEC is not certain to be ratified by the non-OPEC members. Russia has expressed a desire to gradually increase quotas, while Kazakhstan wants to see the cuts rolled back as scheduled, sources told S&P Global Platts after preliminary consultations among some members were organized Nov. 29.

Without an extension agreement, the OPEC+ curbs are scheduled to ease 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.

"We calculate the market surplus could be as high as 1.5 million-3 million b/d in H1 2021 if it doesn't extend cuts," ANZ analysts said in a note Nov. 30.