0336 GMT: The trajectories of the ICE Brent futures and NYMEX crude futures were in opposite directions during the mid-morning trade in Asia Nov. 27, as the latter underwent a price correction, not having fallen as much as the former during the trading session on Nov. 26, with both markers further weighed down by heightened concerns over the pandemic situation in the US.
At 11:36 am Singapore time (0336 GMT), ICE Brent January contract was up 10 cents/b (0.21%) from the Nov. 26 settle at $47.90/b, while the NYMEX January light sweet crude contract was down 70 cents/b (1.53%) at $45.01/b.
Both the ICE Brent January contract and the NYMEX January contract had fallen 2.39% and 0.57% on Nov. 26 to settle at $47.80/b and $45.71/b, respectively, as vaccine optimism had fizzled out, and near-term pandemic considerations had resurfaced.
NYMEX crude futures, having resisted as steep a fall as Brent futures on Nov. 26, buckled during pressure from a gloomy demand outlook brought about by the unabated spread of coronavirus in the US.
According to the COVID Tracking Project, virus-related hospitalizations in the US reached a new record for the sixteenth consecutive day on Nov. 25, and the daily death toll was the highest since early May.
"The market is getting somewhat worried over how the pandemic situation is playing out in the US. We have significant number of cases but no action is being taken," David Lennox, resource analyst at Fat Prophets, told S&P Global Platts on Nov. 27.
"While inaction is helping demand at the moment, it is like waiting for a firecracker to go off once you have lit the wick - at some point we might see drastic measures and that is what the concern is all about."
Meanwhile, the market is also jittery in the run-up to the Dec. 1 OPEC and non-OPEC Ministerial Meeting, which is seen as the next risk-point for oil prices. The meeting is expected to provide a definite statement over whether the alliance will roll-over the current 7.7 million b/d production cuts into next year. However, even before the meeting, the market has already priced in a three-to-six month extension of the cuts.
The decision to maintain the current production cuts will be complicated by the surge in oil prices seen in November. There has been market talk over fissures within the OPEC+ alliance, with UAE reportedly reconsidering whether membership is in its long-term interest. Further, Iraq deputy Prime Minister Ali Allawi said on Nov. 23 that the alliance needs to take into account the economic and political conditions of the members before imposing "one size fits all" production quotas.
"I do think they will extend the current production cuts as the economic climate remains weak, but it will not be an easy decision and there will be a lot of squabbles during the meeting," said Lennox.
Stephen Innes, chief global market strategist at Axi, concurred, as he cautioned in a Nov. 27 note that while an extension of the cuts was still expected to be the default outcome, the rollover might not be an incremental positive, and a failure to extend cuts would hit market negatively.
