Oil pared an early decline as OPEC+ may resist mounting pressure this week to boost production at a faster clip, and traders looked beyond China’s release of fuel reserves to quell shortages.
Global benchmark Brent was 0.3% weaker at $83.50 a barrel after recouping more than half its intraday loss. West Texas Intermediate for December delivery fell 0.4% to $83.21 a barrel on the New York Mercantile Exchange.
Speaking after a Group of 20 summit in Rome Sunday, President Joe Biden criticized Saudi Arabia and Russia for their inadequate response to managing supply, while declining to say what he planned to do if producers didn’t respond.
Key time-spreads pointed to a tight global crude market.
Earlier in the weekend, China said it would release reserves of the two transport fuels to combat shortages, according to the National Food and Strategic Reserves Administration.
The move is a part of an annual rotation of holdings, but the state body gave neither volumes nor a schedule.
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Crude oil has soared this year as the global economy recovered from the impact of the pandemic, lifting consumption ahead of supply.
An energy crunch marked by shortages of gas and coal has also stoked oil demand. Still, the Organization of Petroleum Exporting Countries and its allies have loosened supply curbs imposed last year at only a modest pace, making the case that risks remain.
The cartel’s “meeting is unlikely to see OPEC+ shift from their preordained production increase schedule, but does present some tail risks as the grouping has surprised markets before,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific Pte.
Still, crude is likely to struggle to make new highs this week given factors including weaker gas prices, he said.
The tightness in the crude market is reflected in deeply backwardated pricing patterns, with traders willing to pay a premium for near-term supply. Brent’s prompt spread was $1.26 a barrel on Monday, up from 82 cents a week ago.
OPEC+ is scheduled to gather virtually on Thursday, and may stick with a planned monthly increase of 400,000 barrels a day despite the escalating concerns from top consumers that lofty energy costs will fan inflation and act as a brake on the recovery.
Angola and Iraq were the latest members of the alliance to affirm their support for the current conservative stance on output.
Goldman Sachs Group Inc. estimates global demand topped supply by 2.5 million barrels a day last month, describing the deficit as “unresolved” in an Oct. 29 note.
The bank stuck with a forecast that Brent will hit $90 a barrel.
The increasingly blunt sparring over OPEC+ production came as world leaders pivot to a critical climate conference that’s meant to limit the use of fossil fuels.
The G-20 summit in Rome produced only a tepid agreement, leaving it to negotiators at COP26 in Glasgow to try to achieve a breakthrough.
Traders were also tracking the prospect of revived nuclear talks between Iran and world powers that in time may pave the way for that nation to resume oil exports.
Tehran has signaled it will restart negotiations with Europe “toward the end of November,” U.S. Secretary of State Antony Blinken said on Sunday.
