Oil was little changed with the market awaiting a decision from OPEC+ on its output cut plan, with a virtual meeting between ministers underway.
Plans discussed in talks ahead of the meeting include a one-month delay before production cuts start to be eased with 500 000 barrels a day added on average each month from February to May, according to a delegate. Another said Russia and Saudi Arabia have thrashed out a plan to take to other members later Thursday. The Kremlin said it was too early to comment.
The talks are taking place against the backdrop of an oil futures curve that is suggesting additional production is needed. Brent's nearest futures are at a premium to later ones, a structure known as backwardation that indicates tight supply. The much-watched spread between the nearest two December contracts is also at its strongest since February.
"The whole edifice of oil prices is really hinged on maintaining the production cuts, and if you don't have those, it's a big problem," said Bill O'Grady, executive vice president at Confluence Investment Management in St. Louis. "The only country in the world that's really running on all cylinders now is China. That's helpful because they're a big consumer of oil, but you can't maintain $40 to $50 oil on China alone."
The market had widely expected OPEC+ to extend current production cuts by a quarter, but that option ran into obstacles earlier this week amid a clash Saudi Arabia and the United Arab Emirates. Maintaining the delicate balance the oil market finds itself in has been a complex task, with demand recovering and varying speeds worldwide and prospects for a vaccine buoying the outlook further out even as near-term risks persist. A potential increase in supply could force the market to "sell the news" as investors were expecting a three-to-six month extension of existing cuts, Citigroup analysts including Francesco Martoccia wrote in a report.
"The market is cautious," said Bjornar Tonhaugen, head of oil markets at Rystad Energy. "Today is the day that will likely define the wellbeing of oil balances from January onwards and the market this time doesn't want to rush to quick positive conclusions after Monday's indecisiveness."
West Texas Intermediate for January delivery edged down 5 cents to $45.23 a barrel as of 9:57 a.m. in New York. Brent for February settlement rose 5 cents to $48.30 a barrel.
If the current OPEC+ agreement isn't modified, the group will start returning an additional 1.9 million barrels a day of crude to the market from Jan. 1. It wasn't clear whether the proposals being discussed would return that same volume of production over a longer period, or a different amount, a delegate said.
"Ministers should have aimed to do more, not less, than the three-month delay if inventories are to normalize within the next 18 months," Paul Horsnell, head of commodities research at Standard Chartered, wrote in a note. "The prospect is for a stronger first half 2021 due to extensive vaccine roll-outs and more government stimulus. However, six months of poor data with limited inventory reduction will likely have to be navigated first."