Oil rebounded from the biggest weekly loss since October as Iraq defied expectations by saying OPEC+ will consider deeper output cuts at its meeting this week, and China’s economy showed signs of improvement.
Futures surged as much as 2.7% in New York after plunging 5.1% on Friday. Last week, there were indications OPEC+ wouldn’t make steeper supply reductions. However, Iraq’s Oil Minister Thamir Ghadhban told reporters on Sunday there could be an additional cut of about 400,000 barrels a day. A gauge of China’s manufacturing sector jumped unexpectedly in November, suggesting a recovery in activity.
Oil capped a second monthly gain in November on signs Beijing and Washington are close to an initial trade deal, even after the U.S. passed legislation expressing support for Hong Kong protesters. Talks between the Organization of Petroleum Exporting Countries and its allies in Vienna are expected to focus on improving the implementation of cuts by nations such as Iraq, which has consistently flouted their targets, as Saudi Arabia indicates it’s no longer willing to compensate for the laggards.
“We consider additional cuts unlikely but a rollover of the current agreement until September or December 2020, with an additional focus on compliance,” analysts at consultant JBC Energy wrote in a report. “Anything on top of that would send a bullish signal, while an extension of only three additional months until June could seem bearish.”
West Texas Intermediate for January delivery rose $1.39 to $56.56 a barrel on the New York Mercantile Exchange as of 10:03 a.m. London time. Brent for February settlement advanced $1.36 to $61.85 a barrel on London’s ICE Futures Europe Exchange. The global benchmark crude traded at a $5.39 premium to WTI for the same month.
Contrary to the comments from Iraq’s oil minister, OPEC+ has sent signals that it’ll stick with existing output cuts. Even if the group doesn’t need to go beyond its existing curbs, data suggest it will at least need to prolong the supply deal past its current end-March expiry.