Picture: 123RF/EVGENII BASHTA
Picture: 123RF/EVGENII BASHTA

London — Oil prices were steady on Wednesday as the market awaited a pact from producers on output and Britain became the first country to approve a Covid-19 vaccine for use, boosting hopes for a future recovery in oil demand.

Prices were hit by a surprise build in oil inventories in the US and as Opec and its allies created uncertainty with a two-day delay to a formal meeting to decide whether to increase production in January.

Brent crude oil futures were down nine US cents, or 0.2%, at $47.33 a barrel by 10.12am GMT, while West Texas Intermediate crude was down 11c, or 0.3%, at $44.44.

Industry data from the American Petroleum Institute showed US 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 Opec, Russia and other allies, a group known as Opec+, postponed talks on next year's oil output policy to Thursday from Tuesday, according to sources.

The group this year imposed production cuts of 7.7-million barrels per day (bpd) as the coronavirus pandemic hit fuel demand.

It had been widely expected to roll those reductions over into January-March 2021 amid spikes in Covid-19 cases.

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.

“Reports about internal discords within the oil cartel following Monday’s virtual meeting has undermined the prevailing optimism,” said Stephen Brennock of oil broker PVM.

He said market expectations were still leaning towards the extension of the current tranche of cuts through the first quarter of 2021, though “full in the knowledge that anything less would trigger a brutal selling frenzy”.

On Wednesday, Britain became the first western country to approve a Covid-19 vaccine, jumping ahead of the US and mainland Europe in what may be a first step towards a return to normal life that will boost oil consumption back to pre-crisis levels.

Reuters

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