Oil prices fell early on Wednesday but later pared some of the losses on news that Britain has become the first country in the world to approve a vaccine for use and that it will be rolled out from early next week.
Prices had been hit earlier by a surprise build in oil inventories in the United States and as OPEC and its allies left markets in limbo by delaying a formal meeting to decide whether to increase output in January.
Brent crude oil futures were down by 8 cents, or 0.2%, at $47.34 a barrel by 0743 GMT, while West Texas Intermediate crude was down by 14 cents, or 0.1%, at $44.41.
Industry data from the American Petroleum Institute showed U.S. crude inventories rose by 4.1 million barrels last week, compared with analysts’ expectations in a Reuters poll for a draw of 2.4 million barrels.
The numbers came after the Organization of the Petroleum Exporting Countries (OPEC), Russia and other allies, a group known as OPEC+, postponed talks on next year’s oil output policy to Thursday from Tuesday, according to sources.
Earlier this year, the group imposed production cuts of 7.7 million barrels per day (bpd) as the coronavirus pandemic hurt fuel demand. It had been widely expected to roll those reductions over into January-March 2021 amid spikes in COVID-19 cases.
“Oil traders have long been anticipating a 3-6 months delay in planned production hikes by the coalition, rendering oil prices vulnerable to unwinding trades should OPEC+ fail to deliver a plan to rein output,” said Margaret Yang, a strategist at DailyFX.
Analysts from ANZ said in a note on Wednesday that the market surplus could be as high as 1.5 million to 3 million barrels per day in the first half of next year, if the group does not extend cuts.
But the United Arab Emirates (UAE) said this week that even though it could support a rollover, it would struggle to continue with the same deep output reductions into 2021.
Meanwhile non-OPEC+ member Norway’s oil output curbs, in place since June, are set to end on Dec. 31, which could further dent prices.