Oil Surges On Report Russia Proposes Delay Of OPEC+ Output Hike

After plunging late on Sunday as electronic trading returned after a week in which the UK announced fresh lockdowns while Libyan output surged to 1mmb/d, oil has followed in futures’ footsteps and moments ago reversed dramatically, and turned green after plunging over 5% at one point overnight , on a Bloomberg report Russia was mulling delaying the return of some OPEC+ output until the end of Q1. In kneejerk response, futures in New York were down 1% to $35.44/bbl by 8:19am New York time, after earlier falling as much as 6% to a five-month low.

The report follows a report from EnergyIntel last week according to which OPEC+ are mulling a proposal to roll over their production cuts at current levels for another three months until Mar. 31, citing delegates.

Furthermore, as NewsSquawk notes, Russia and Saudi Arabia have been making some positive noises recently about supporting the oil market for longer, as the demand side of the equation comes under pressure from increased COVID restrictions. However, as yet, the signal from key OPEC producers Iraq, Kuwait and UAE have suggested that the three are more reticent about imposing further supply curbs for longer, seemingly concerned about domestic oil revenue.

As a reminder, OPEC+ is due to taper cuts to 5.7mln BPD in Jan from the current 7.7mln BPD, with key dates ahead: JMMC on 17th November, OPEC and OPEC+ confabs on 30th November and 1st December respectively.

Meanwhile, overnight Goldman published a note according to which the move lower in prices since last Friday is equivalent to a downward revision of demand expectations by 2 mb/d in Nov-Dec and by 0.5 mb/d in 2021 (c. 0.7% of global GDP). According to the bank, such a demand repricing into year-end is equivalent to European consumption falling to May levels, when stricter lockdowns were just ending: “While this is an already aggressive repricing – with new lockdowns less restrictive and potentially inflecting the likely virus spread in a few weeks – virus uncertainty, lockdown headlines and the aftermath of the US election all point to further price volatility through November and potential near-term downside.”

In short, the worst-case scenario is already priced into oil, and any positive news – either on stimulus or the election – will likely send crude surging.