Oil prices reportedly fell about 1% on Monday. The situation comes amid investor jitters ahead of the OPEC+ meeting. The plan is for the meeting to be held to decide whether the producer group will extend massive production reductions to rebalance the global market.
Market data showed that the Brent crude futures fell 58 cents or 1.2% to $47.60 a barrel. The more actively traded Brent contract in February was at $47.77 per barrel. It’s down 48 cents. U.S. West Texas Intermediate for January also fell 40 cents or 0.9%.
Both benchmarks rose more than 20% on Nov. The strongest monthly increase occurred in May. This was driven by the hope that three promising coronavirus vaccines could overcome the rapid spread of the disease. If that happens, then it thus supports the demand for fuel.
OPEC+ To Delay Production Additions
Some traders and analysts really want that the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia (the OPEC+ grouping) will delay an increase in oil production. Previously, the addition was planned to be done in the next year.
The reason is the second wave of COVID-19 that has reduced global demand, especially for fuel. OPEC+ had previously agreed to increase production by 2 million barrels per day (BPD) on Jan. If calculated, this would mean about 2% of global consumption.
Then, the group that regulates oil commodities held a preliminary round of talks on Sunday. However, they have yet to find a consensus on oil production policies to be set for 2021 ahead of crucial meetings on Monday and Tuesday this month.
The situation was revealed by four OPEC+ sources to Reuters some time ago when encountered. Signs of division in the organization raised the prospect the group would not approve an extension of current production cuts. This was conveyed by an ANZ analyst lately.
Concerns Over Policy and Supply
Several members, including the UAE and Iraq, have expressed concern about the policies to be taken by OPEC+ with regard to supply. A global bank estimates that the oil market surplus could reach 1.5 million to 3 million barrels per day by the first half of 2021.
Elsewhere, China is also reported to be releasing its manufacturing data on Monday. Most likely, these conditions will indicate expansion in the world's second-largest economy and major oil importers as well. Of course, this discourse attracts the attention of many market participants.
Meanwhile, the Dollar is now at a low level. The major currency hit its lowest level in two and a half years. Meanwhile, risky currencies show mixed conditions. That's because of a global equity rally that has seen a surge in risk appetite pause in November.
Causes of Rising Global Market Sentiment
The combination of Joe Biden's victory in the U.S. election, great expectations on stimulus, and a series of positive COVID-19 vaccine announcements have caused global market sentiment to rise this month. The situation pushed the dollar down and the currency risked strengthening.
Chinese manufacturing showed the fastest growth in 3 years. Meanwhile, growth in the service sector also reached its highest level. This can be seen in the data on Monday. On the last day of the month, the dollar was set at its biggest monthly loss.
It was against a major currency since July. That is especially after deleting 2.5% of its value in November. Meanwhile, the New Zealand dollar is also preparing for its biggest monthly gain since late 2013 or seven years ago.
That is helped by the perception that the improving global economic outlook reduces the risk of negative interest rates. Moderna, based on the news, will apply for emergency authorization. That is for their corona vaccine in Europe and the United States since it showed a great result.
