WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled lower for the third session on Tuesday. The losses came as traders grew increasingly worried Organization of the Petroleum Exporting Countries and Russia-led partners won't reach an expected agreement to extend their 7.7 million-barrel-per-day (bpd) production agreement into the first quarter of next year, with tensions flaring over the size and timetable for supply cuts during the first round of talks.
OPEC+ have delayed the final round of negotiations from Tuesday until Thursday, Dec. 3, but until then, traders will gauge through inventory data on U.S. crude and refined product supplies. Commercial crude oil stockpiles likely have fallen 1.9 million barrels (bbl) in the final week of November, with gasoline stockpiles rising 1.3 million bbl and distillate inventories projected to have decreased by 400,000 bbl from the previous week.
American Petroleum Institute will release its rundown of inventory data at 4:30 p.m. EST, followed by official statistics from the U.S. Energy Information Administration out at 10:30 a.m. EST on Wednesday.
The first round of talks between the 23-nation producers' group concluded without an agreement to extend their landmark agreement into the first quarter of next year -- a move largely anticipated by the markets. The issue at stake appears to be disagreement between Saudi Arabia, Russia and the United Arab Emirates on the size and timeframe for the cuts. Saudi Arabia -- OPEC's de facto leader favors delaying 2 million bpd output hike until at least April, while Russia -- the second-largest producer within the alliance, advocates for gradual easing of those cuts by 500,000 bpd each month beginning Jan. 1. The third-largest producer, the United Arab Emirates, backs the extension only if laggard members to the agreement make up for the missed quotas from the prior months.
Amidst the brawl, Saudi's oil minister offered to resign from co-chairmanship of Joint Ministerial Monitoring Committee meeting, prompting prices to slide further into the red on Tuesday.
Should they fail to agree on an extension, oil prices will likely get hit with a wave of selling as traders were pricing in continued market support from the OPEC+ for weeks now.
Further weighing on prices, fresh data out of European Union and the United States showed partial lockdowns and quarantine restrictions slowed growth in their manufacturing sectors in November. The Institute of Supply Management index dropped 1.8 points to 57.5 as the employment component tumbled back into contraction territory last month, falling nearly five points to land at 48.4. In Eurozone, manufacturing index slipped 1 point from the previous month to 53.8 reading even as policymakers across the EU deliberately excluded factories from the second wave of shutdowns.
In contrast, China's Caixin Manufacturing index came at 10-year high 54.9, beating expectations of 53.5. Activity in China's factory sector has now recovered to its pre-pandemic levels.
"Since COVID-19 paralyzed huge swathes of the economy early this year, China has seen a strong rebound in manufacturing, helped by strict virus containment measures, infrastructure-driven stimulus, strong exports of medical supplies, and pent-up demand," Wang Zhe, senior economist at Caixin Insight Group, wrote in a note accompanying the survey release.
On the session, U.S. West Texas Intermediate crude benchmark for January delivery retreated below $45 per bbl to settle at $44.55, down nearly 1.7% from the previous session and ICE February Brent futures declined 46 cents to $47.42 per bbl. NYMEX January ULSD futures tumbled 2.41 cents or 1.7% to finish at $1.3467 gallon, while the January RBOB contract retreated more than 2 cents to $1.2204 gallon.
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