Oil futures fell on Tuesday after OPEC+ decided to postpone the second day of its meeting

Recap: Oil futures fell on Tuesday after OPEC+ decided to postpone the second day of its meeting to December 3. According to recent reports, Saudi Arabia continues to push for a three-month extension of current production cuts. However, other OPEC+ members want to gradually increase oil production. While compliance was quite strong in comparison to OPEC standards, several members like Iraq and Nigeria exceeded quotas. Adding to the worrisome is Libya, who has been exempt from the production cut due to the civil war. This, plus, increased production by U.S. shale producers who may want to take advantage of the recent rise in prices, is making it difficult for OPEC+.  January WTI settled at $44.55 a barrel, down 79 cents, or 1.74%, while February Brent fell 46 cents, or 0.96%, to settle at $47.42 a barrel. January RBOB slipped 2.12 cents, to settle at $1.2204 a gallon. January heating oil settled at $1.3473, down 2.41 cents.  

Market Outlook: The initial rally in crude oil prices fizzled out as traders await the outcome of the OPEC meeting. Our stance on this market has not changed despite the recent rise in prices. While we did anticipate a move toward $45, we were not confident that prices would be able to sustain a rally given the demand situation due to the coronavirus. OPEC+ can cut as many barrels as it wants but without a pickup in demand, a move to the upside will be limited. Should WTI get below the 200-day moving average, we would look for a push toward $42. Prior to $42, there is support set at $43.70. Resistance is set at $45.63 and $46.30.

Fundamental News: Algeria's Energy Minister, Abdelmadjid Attar, said he was optimistic about reaching a consensus to extend an output deal a day after an OPEC+ meeting was postponed, adding that maintaining the consultations showed the willingness to reach a deal.

The UAE demanded better adherence with oil supply cuts, effectively delaying the latest strategy decision by OPEC and its allies by a few days.  The move highlights the UAE’s increasing role within OPEC as it seeks to increase production in the years ahead to gain market share. It also underscores Abu Dhabi’s growing political independence from Saudi Arabia.  It stated that even though it could support a rollover, it would struggle to continue with the same deep output reductions into 2021.  It also said that all overproducing countries should comply with their cuts and compensate for previous excess output. 

A bipartisan group of U.S. lawmakers unveiled a $908 billion COVID-19 relief bill aimed at breaking a deadlock between Democrats and Republicans over new emergency assistance for small businesses, unemployed people, airlines and other industries during the pandemic.  The measure has not yet been written into legislation.  If the bipartisan coronavirus aid bill gains traction in coming days, it could either be attached to the spending bill or advance on a separate track. 

The OECD said the outlook for the global economy is improving despite a second wave of coronavirus outbreaks in many countries as vaccines emerge and a Chinese-led recovery takes hold.  In its latest Economic Outlook, the OECD said the global economy will grow 4.2% next year and ease to 3.7% in 2022, after contracting 4.2% this year. 

The U.S. Environmental Protection Agency was set to miss a deadline on Monday to announce how much renewable fuel the nation’s refiners must blend into their fuel mix next year.  Under federal law, the EPA must finalize its decision on the annual biofuel blending volume requirements it imposes on the refining industry for the next year by November 30th.  The American Fuel and Petrochemical Manufacturers, a top refinery industry association said it hoped the EPA will “soon provide certainty” to its members.

Early Market Call – as of 8:20 AM EDT

WTI – Jan $44.26, down 28 cents

RBOB – Jan $1.2126, down 78 points

HO – Jan $1.3444, down 29 points

View the Sprague Refined Products Market Watch Report in a downloadable pdf format by clicking below.

Click to view more online:
Heating Oil Supplier

Diesel Supplier
View market updates
View our refined products glossary
Go to SpraguePORT online

This market update is provided for information purposes only and is not intended as advice on any transaction nor is it a solicitation to buy or sell commodities. Sprague makes no representations or warranties with respect to the contents of such news, including, without limitation, its accuracy and completeness, and Sprague shall not be responsible for the consequence of reliance upon any opinions, statements, projections and analyses presented herein or for any omission or error in fact. The views expressed in this material are through the period as of the date of this report and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance or results and actual results or developments may differ materially from those projected. The whole or any part of this work may not be reproduced, copied, or transmitted or any of its contents disclosed to third parties without Sprague’s express written consent.