Oil prices edged lower in early trading on Tuesday but later scaled some of the losses after reports that the United Kingdom had emerged the first nation to endorse a COVID-19 vaccine for use, with roll-out planned for next week.
Before the news broke, oil prices had been impacted by a larger-than-expected surge in crude stockpiles in the U.S. and as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies threw markets into uncertainty after postponing a meeting to deliberate the possibility of expanding supply in January to Thursday.
Oil price for Bonny Light, Nigeria’s premium oil grade, dropped 3 cents or 0.06% to $47.47. Qua Iboe, another key national oil grade, was down by 37 cents or 0.79% at $46.51 in early trade on Wednesday.
United States oil stocks grew by 4.1 million barrels last week, statistics from the American Petroleum Institute showed, contrary to a forecast of 2.4 million by analysts in a Reuters poll.
The figures came in the wake of the postponement of deliberations on the 2021 oil output policy by OPEC and its Russia-led allies (a cartel known as OPEC+).
OPEC+ introduced a reduction in output by 7.7 million barrels per day (bpd) earlier this year as the pandemic hit fuel demand and hurt oil prices.
There was an anticipation of maintaining the cuts into January through March next year in the face of upticks in coronavirus infections.
Margaret Yang of DailyFX said “oil traders have long been anticipating a 3-6 months delay in planned production hikes by the coalition, rendering oil prices vulnerable to unwinding trades should OPEC+ fail to deliver a plan to rein output.”
A glut in the market could approach 1.5 million barrels per day or up to a double of that figure between January and June 2021, provided the group failed to prolong the cuts, ANZ analysts said in a note.
Yet, the United Arab Emirates said much as it might back a rollover, it would find it hard to tolerate the same profound production cuts into 2021.
Norway, a non-OPEC nation, which has been curbing supply since June, will have its cuts expire by year end, which might hobble oil prices further.
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