By Geoffrey Smith
Investing.com -- Crude oil prices came off their highs on Thursday as the Organization of Petroleum Exporting Countries delayed the start of a key meeting to coordinate its output levels with allies led by Russia, in what was taken as a worrying signal of remaining differences between the major producers.
By 9:05 AM ET (1405 GMT), U.S. crude futures were down 0.4% at $45.12 a barrel, while Brent crude futures, the international benchmark, were down 0.2% at $48.14 a barrel.
U.S. gasoline futures were up 0.1% at $1.2415 a gallon.
Ahead of the meeting, newswires had reported that Russia – whose approval is crucial to any agreement – had suggested tapering the current output cuts by 500,000 barrels a day every month, something that would leave the ‘OPEC+’ bloc’s output some 1.5 million barrels a day higher by the end of March.
Going into the meeting, the market had assumed that the bloc would keep output at its current level for three months, shying away from a commitment to restore 1.9 million barrels a day of production from January 1.
Russia is reportedly supported by OPEC member the United Arab Emirates and by non-OPEC Kazakhstan. Other OPEC members such as Libya aren’t covered by the deal, and thus face no constraint on raising output.
Given that the sharp rise in prices over the last month are a powerful incentive for countries to over-produce in pursuit of a free ride, some analysts think that a small increase will be approved, if only to legitimize the increased supply and preserve an appearance of discipline across the bloc.
Prices have rocketed higher since early November, when the likes of Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) confirmed the efficacy and safety of their vaccines for preventing Covid-19, which traders expect to result in a smart rebound in demand next year. Crude has held on to almost all its gains despite short-term headwinds from two slightly bearish reports on U.S. inventory levels this week.
"Basically we see the market as balanced right now, when inventory overhang is added in," said Paul Sankey of Sankey Research in emailed comments. "Any increased barrels today would add to over-supply.
Increased barrels in February would also likely weigh on prices, coinciding as they would with the seasonal low point in fuel demand.