Oil prices extended losses on Wednesday, hit by a surprise build in oil inventories in the United States and as OPEC and its allies left markets in limbo by delaying a formal meeting to decide whether to increase output in January.
Industry data from the American Petroleum Institute showed U.S. crude inventories rose by 4.1 million barrels last week, compared with analysts’ expectations in a Reuters poll for a draw of 2.4 million barrels.
The numbers came after the Organization of the Petroleum Exporting Countries (OPEC), Russia and other allies, a group known as OPEC+, postponed talks on next year’s oil output policy to Thursday from Tuesday, sources said.
Earlier this year the group imposed production cuts of 7.7 million barrels per day (bpd) as the coronavirus pandemic cut into fuel demand. It had been widely expected to roll those reductions over into January-March 2021 amid spikes in Covid-19 cases.
“The risks of the OPEC+ alliance failing to reach an agreement are high,” ANZ analysts said in a note on Wednesday.
“A resurgent virus has seen restrictions on travel increase across Europe and the U.S,” they said, adding the market surplus could be as high as 1.5 million to 3 million barrels per day in the first half of next year, if the group does not extend cuts.
But the United Arab Emirates (UAE) said this week that even though it could support a rollover, it would struggle to continue with the same deep output reductions into 2021.
Meanwhile non-OPEC+ member Norway’s oil output curbs, in place since June, are set to end on Dec. 31, which could further dent prices.
Still, oil price losses were capped by investor hopes of a vaccine to combat rising Covid-19 cases which could in turn revive fuel demand.