SINGAPORE – Oil prices were little changed on Tuesday before deadlocked talks between major producers about potential changes in February output are set to continue later in the day while fuel demand concerns lingered amid new COVID-19 lockdowns.
Brent crude futures for March fell 6 cents, or 0.1 percent, to $51.03 a barrel, while US West Texas Intermediate crude for February was at $47.63 a barrel, up 1 cent.
Both contracts fell more than 1 percent on Monday after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, failed to agree on changes to February’s oil output.
Saudi Arabia argued against pumping more because of new lockdowns while Russia led calls for higher production, citing recovering demand.
OPEC+ sources told Reuters that Russia and Kazakhstan had backed raising production while Iraq, Nigeria and the United Arab Emirates suggested holding output steady.
On Sunday OPEC Secretary General Mohammad Barkindo had warned OPEC+ experts of downside risks facing the oil market.
On Monday, Saudi energy minister Prince Abdulaziz bin Salman said OPEC+ should be cautious despite a generally optimistic market environment as demand remains fragile and the new variant of coronavirus is unpredictable.
“In many parts of the world, where infection rates have increased worryingly, a new wave of lockdowns and restrictions are being put in place, which will inevitably impact the rate of economic recovery in those countries,” he said.
The new variant of coronavirus, reported in Britain last month, is spreading globally and British Prime Minister Boris Johnson was scheduled to set out tougher lockdown rules on Monday.
“OPEC+ drama is of course steering the latest oil price downgrade, but the heavier hand is likely the still unknown impact of the new strain on economic activity and travel – both factors that warrant a belated mini-price correction after the winter holidays,” said Louise Dickson, oil markets analyst at Rystad Energy.
England went into a new lockdown on Monday as its COVID-19 cases surged following the emergence of a more transmissible variant of the coronavirus.
“Near-term demand growth is stalling due to the resurgence of Covid-19 across North America, Europe and the Middle East and is likely set for deeper declines over the next several months,” Fitch Solutions said.
“This adds to our view for neutral to bullish prices across most of 2021 with difficult conditions to persist through the first half of the year,” Fitch said, adding that Brent is expected to average $53 a barrel this year.
At the same time, rising tensions in the Middle East supported oil prices.