Oil prices edged up in early Asian trade on Monday, recouping some losses from the previous session as hopes that Organization of Petroleum Exporting Countries, OPEC +, will continue to curb output offset concerns of weaker fuel demand amid rising COVID-19 cases and higher production from Libya.
Brent crude futures for January rose 27 cents, or 0.6 per cent , to $43.05 a barrel while U.S. West Texas Intermediate crude for December was at $40.48 a barrel, up 35 cents, or 0.9 per cent .
Both contracts gained more than 8 per cent last week on hopes of a COVID-19 vaccine and that the OPEC and their allies including Russia will maintain lower output next year to support prices.
The group, also known as OPEC+, has been cutting production by about 7.7 million barrels per day, with a compliance rate seen at 101 per cent in October, and had planned to increase output by 2 million bpd from January.
The OPEC+ is due to hold a ministerial committee meeting on Tuesday which could recommend changes to production quotas when all the ministers meet on November 30 and December 1.
However, the speedy recovery of oil production in Libya, an OPEC member, back to above 1.2 million bpd presents a challenge to OPEC+ cuts while a slowdown in traffic across Europe and the United States dampened fuel demand recovery hopes this winter.
“European motorway traffic is down almost 50 per cent in recent weeks in some countries (such as France) as lockdown measures are increased,” ANZ analysts said.
People movement on highways in the United States was also slowing based on vehicle mileage data despite authorities’ reluctance to implement new restrictions, they added.
While fuel demand is slowing, Baker Hughes’ data showed that U.S. oil and natural gas rig count rose last week to their highest since May as producers, spurred by higher crude prices, return to the wellpad.
ANZ analysts expect the oil surplus to increase to between 1.5 million and 3 million bpd in the first half next year with a vaccine only boosting demand in the second half.