Oil futures erased an early loss Monday, turning higher after a news report said the Organization of the Petroleum Exporting Countries and their allies were rethinking plans to continue with modest output increases.
The potential move was seen as a reaction to an effort by the Biden administration to persuade oil-consuming countries to coordinate a release of crude reserves in an effort to push down prices.
West Texas Intermediate crude for January delivery CL00, +1.09% CLF22, +1.09% rose 36 cents, or 0.5%, to $76.30 a barrel on the New York Mercantile Exchange. January Brent crude BRN00, +1.05% BRNF22, +1.05%, the global benchmark, was up 38 cents, or 0.5%, at $79.27 a barrel on ICE Futures Europe. Both benchmarks fell sharply last week, logging a fourth straight week of declines to end at seven-week lows.
Bloomberg, citing comments by OPEC+ delegates, reported that it wasn’t clear that even modest production increases planned by the group would go ahead. OPEC+ has been raising output quotas by 400,000 barrels a day in monthly increments. OPEC+ is slated to meet on Dec. 2.
Crude was initially pressured as worries mounted over a rise in COVID-19 cases in Europe, which have resulted in renewed restrictions on activity. A full lockdown took effect in Austria on Monday, while protests against tightened COVID restrictions in the Netherlands and Belgium turned violent over the weekend.
“While further lockdowns aren’t guaranteed, case numbers in some countries are worryingly high and governments may be tempted to follow in Austria’s footsteps,” said Craig Erlam, senior market analyst at Oanda, in a note.
“This is what OPEC+ has warned of for months when forced to defend not raising production as prices have spiked. Now we’re seeing prices correct and that could continue in the coming weeks if countries announce a tightening of restrictions,” he said.
Worries were underlined after German Chancellor Angela Merkel on Monday was reported to have told senior members of her Christian Democratic Union party that the COVID situation was “highly dramatic” and “worse than anything Germany has experienced so far.”
Meanwhile, Japanese officials were working on ways to get around restrictions on releasing crude from the country’s strategic reserve, according to a news report. Oil has seen pressure as the Biden administration has coordinated with China, Japan and other oil-consuming countries on a coordinated release of crude in the effort to tackle hire prices.
Crude can be released from Japan’s reserve only during periods of shortage or natural disaster, analysts said. Reuters reported that officials were considering a move that would see Japan release crude above the reserve’s minimum threshold as a potential workaround.
January natural-gas futures fell 30.2 cents, or 5.9%, to $4.843 per million British thermal units.
“The latest weather forecasts from NOAA lean bearish, as the 6- to 10-day outlook predicts colder-than-normal conditions east of the Mississippi, ultimately giving way to the warmer-than-normal conditions in the West set to spread across nearly the entire country in the 8- to 14-day outlook,” wrote Brian Steinkamp, commodity analyst at Schneider Electric, in a note. “Such conditions will likely lower heating demand relative to seasonal averages.”