WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved lower in early trade Monday, with the international crude benchmark falling 1% as traders monitor the beginning of formal discussions at this week's OPEC+ meeting this week, with preliminary talks failing to yield an early agreement on extending current production cuts into the first quarter of next year.
This weekend's meeting among ministers of the OPEC+ alliance revealed a split among key members to the agreement on production levels for early 2021. Although the outlook of discussions remains favorable for an extension, Russia and Kazakhstan have reportedly backed the position to ease curbs by 2 million barrels per day (bpd) beginning on Jan. 1, 2021, from the current 7.7 million bpd in accordance with original schedule of the agreement, a position opposed by Saudi Arabia and Kuwait.
Oil traders have priced in an extension of the current OPEC+ agreement for weeks, and any deviation from those expectations would be seen as a bearish development for global oil prices, with the increase in supply coming at a time of weak demand exacerbated by tightening quarantine restrictions across major economies.
On Friday, the United States reported an all-time high number of new COVID-19 infections at 200,000, with both caseload and hospitalizations forecasted to continue higher following Thanksgiving holiday. Los Angeles became the first U.S. city to issue "stay-at-home" order since the lifting of the nationwide lockdown six months ago.
"We are in the middle of steep slope. States will have to do the kinds of restrictions to relieve the stress from the hospital capacity locally," said Dr. Anthony Fauci on Sunday.
In the European Union, there have been encouraging signs of easing lockdowns imposed in early October, but politicians seem to move cautiously, with Germany -- the bloc's largest economy, extending its partial lockdown until Dec. 20.
Even still, oil prices remain supported by the flow of positive vaccine news, with initial vaccinations in the Western Hemisphere now expected to begin as early Dec. 7.
Goldman Sachs economists forecast a large number of people in developed countries would be vaccinated by the middle of next year, reaching 70% by the fall 2021. The United Kingdom is projected to vaccinate about 50% of its population by March, while the United States and Canada are seen reaching that level by April. The European Union, Australia and Japan are likely to reach a 50% vaccination rate by May.
"Our baseline forecast that widespread immunization should drive a sharp pick up in global growth starting in the second quarter," said Goldman Sachs in an investment note.
At the beginning of the last trading session of November, U.S. crude benchmark for January delivery traded just above $45 per barrel (bbl), while on track for more than 20% advance this month. ICE January Brent futures eased 50 cents to trade near $47.60 bbl ahead of contract expiration. NYMEX December ULSD futures fell nearly 2 cents to $1.3610 gallon and the December RBOB contract traded near $1.2639 gallon, down 1.83 cents early Monday, with both December products contracts to expire Monday afternoon.
Liubov Georges can be reached at email@example.com
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