NEW YORK (Reuters) – Oil fell about 1.5% on Monday as the world’s major oil producers discussed extending deep output cuts at talks this week, but benchmark crude will end the month with a strong rally built on hopes that COVID-19 vaccines will soon be available.
Brent crude for January delivery, which expires on Monday, dropped 68 cents, or 1.4%, to $47.50 a barrel by 1:24 p.m. EST (1824 GMT). The more actively traded February Brent contract was down 85 cents, or 1.76%, at $47.40.
U.S. West Texas Intermediate crude for January fell 73 cents, or 1.6%, to $44.80 a barrel.
OPEC members reached a broad consensus on the need to extend existing oil production cuts for three months from January if their allies in the wider OPEC+ group also support such a move, ministers and delegates said on Monday.
The Organization of the Petroleum Exporting Countries, Russia and others, known as OPEC+, plan to hold wider talks on Tuesday after discussions of key ministers on Sunday failed to reach a consensus.
Algerian Energy Minister Abdelmadjid Attar, holder of the OPEC’s rotating presidency, said there was “consensus at the OPEC level” to extend current supply cuts of 7.7 million bpd for another three months. Until recently, the cartel had planned to trim the size of those cuts by 2 million bpd, adding more supply to the market.
Atta said members are working on convincing its allies, including Russia in the OPEC+ to support the move, but the comments were not enough to ease investors’ nerves.
“A lot of those statements get taken with a grain of salt,” said John Kilduff, partner at Again Capital LLC in New York. “You would have liked to have heard it from the Saudis or a bigger player on the stage than just the Algerians.”
Oil prices have climbed this month, on track for a 25% gain in their biggest monthly rise since May, as vaccine developments raise hopes for an economic recovery that could boost fuel demand.
A Reuters poll of 40 economists and analysts forecast Brent would average $49.35 a barrel next year, estimating that prices would have some trouble sustaining a rally.
Demand has recovered in Asia but not Europe and the Americas, presenting OPEC+ with a “challenging choice on whether to delay or bring back more oil,” said FXTM analyst Hussein Sayed.
Goldman Sachs said a winter surge in COVID-19 cases would not prevent the oil market rebalancing as a result of vaccine progress. It saw Brent rising to $65 in 2021.
Graphic: Brent and WTI price forecast for 2021