Oil prices slip as market awaits output deal

Prices hit by surprise build in oil inventories in United States

LONDON:

Oil prices slipped on Wednesday as the market awaited an output pact from producers, although Britain’s approval of a Covid-19 vaccine gave hopes for demand recovery a boost.

Prices were hit by a surprise build in oil inventories in the United States and as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies created uncertainty with a two-day delay to a formal meeting to decide whether to increase production in January.

Brent crude oil futures were down $0.13, or 0.3%, at $47.29 a barrel by 1203 GMT, while West Texas Intermediate crude was down $0.21, or 0.5%, at $44.34.

Industry data from the American Petroleum Institute showed US crude inventories rose by 4.1 million barrels last week, compared with analysts’ expectations in a Reuters’ poll for a draw of 2.4 million barrels.

 “Traders would not take huge gambles as they are waiting for the final verdict of Thursday’s OPEC+ meeting,” said Rystad Energy head of oil markets Bjornar Tonhaugen. “When stakes are so high, it is dangerous to move prices much ahead.”

OPEC, Russia and other allies, a group known as OPEC+, postponed talks on next year’s oil output policy to Thursday from Tuesday, according to sources.

The group this year imposed production cuts of 7.7 million barrels per day (bpd) as the coronavirus pandemic hit fuel demand. It had been widely expected to roll those reductions over into January-March 2021 amid spike in Covid-19 cases.

But the United Arab Emirates (UAE) said this week that even though it could support a rollover, it would struggle to continue with the same deep output reductions into 2021.

Britain on Wednesday became the first western country to approve a Covid-19 vaccine, jumping ahead of the United States and the European Union in what may be a first step towards a return to normal life and boost oil consumption.