(Bloomberg) — Oil traded near an eight-month high after OPEC+ reached a compromise deal to gradually taper output cuts from the start of next year.
Futures edged higher in New York after rising 0.8% on Thursday and are set to eke out a modest fifth weekly gain. The group will start adding 500,000 barrels a day of crude to the market in January and ministers will then hold monthly meetings to decide on the next steps. The deal avoided a breakdown of OPEC+ unity after a tense split between Saudi Arabia and the United Arab Emirates.
The oil futures curve, meanwhile, is signaling tighter supply and a brighter long term outlook. The prompt timespread for global benchmark Brent moved further into backwardation on Thursday, while the nearest December contract is trading at a higher level than the same contract for December 2022.
The OPEC+ deal — agreed after almost a week of fraught negotiations — offers something to those members concerned about the fragility of the market, and also to nations wanting to pump more to take advantage of higher prices. Oil has rallied recently on optimism fuel demand will start to rebound once Covid-19 vaccines are widely distributed.
See also: Vitol Pays $160 Million to Settle Bribery, Manipulation Charges
Video: Markets ‘rightly’ optimistic about growth and inflation, Barclays economist says (CNBC)
|West Texas Intermediate for January delivery added 0.4% to $45.80 a barrel on the New York Mercantile Exchange as of 8:20 a.m. Singapore time and is up 0.6% so far this weekFutures closed at $45.71 on Nov. 25, the highest level since early MarchBrent for February settlement rose 1% to close at $48.71 on the ICE Futures Europe exchange on Thursday, the highest since March 5|
Prior to the OPEC+ meeting, market watchers were expecting the alliance to delay the easing of planned output cuts by three months. The agreed deal will still allow for the oil market to remain in deficit throughout the first quarter of next year, according to TD Securities.
Any adjustments to tapering oil production cuts can be in any direction, with a potential decision based on all factors, both negative and positive, Russian Deputy Prime Minister Alexander Novak said after the meeting on Thursday.
Adding to positive sentiment are signs that the U.S. may be closing in on new stimulus to boost the pandemic-hit economy ahead of a vaccine rollout. The global demand recovery is uneven, with the U.S. and Europe grappling with a resurgent coronavirus, while parts of Asia rebound strongly.
For more articles like this, please visit us at bloomberg.com
©2020 Bloomberg L.P.