By Geoffrey Smith
Investing.com -- Crude oil prices reversed their losses to be slightly higher in choppy trading early Monday in New York, after a key meeting at the Organization of Petroleum Exporting Countries opened with a gloomy assessment of the market outlook.
That somewhat paradoxical reaction is due to perceptions that the organization will choose to keep output at or close to its current level for another few months, rather than increase it at the start of next year, as originally intended.
By 9:15 AM ET (1415 GMT), U.S. Crude futures were up 0.2% at $45.68 a barrel, fully a dollar above where they had been only four hours earlier.
The international benchmark Brent was down 0.2% at $48.16, but still holding on to most of the gains it had made last week.
Prices have returned to close to their pre-pandemic levels in recent days on announcements from various biotech companies that their vaccines against Covid-19 are safe and effective.
However, OPEC President Abdelmajid Attar said in opening remarks to the virtual meeting of ministers that “it is clear that a global deployment of vaccines will take time, and its effect will likely begin to be significantly apparent in the second half of 2021.”
“"We must be aware that the market conditions of 2020 are likely to continue in the first quarter of 2021,” Attar added.
He reminded his audience that global oil demand for 2020 is expected to decline by around 9.8 million barrels a day, with the current wave of the pandemic and related lockdowns putting a damper on demand in north America and Europe.
That was evident in a sharp drop in air travel over the Thanksgiving weekend in the U.S., where airports said they scanned 1.8 million passengers, down from 2.8 million a year earlier. The Automobile Association of America, however, indicated that much of the demand lost to the air travel market may have diverted to the roads.
Others at the OPEC meeting noted that there was still no consensus about where to set output levels for the coming months.
“It won’t be an easy meeting,” Iran’s oil minister Bijan Namdar Zanganeh was quoted as saying by the Iranian oil ministry’s news agency SHANA. “Some members are against the extension of the output cut and this makes it difficult.”
Iraq and the United Arab Emirates, OPEC’s second- and third-largest producers, are understood to be chafing at the demand for further restraint, as is non-OPEC Kazakhstan. However, both Saudi Arabia and Russia, the two biggest signatories of the current pact, appear to be on the same page, judging by an unctuous Kremlin summary of a telephone call between President Vladimir Putin and Crown Prince Mohammed bin Salman last week.