(Bloomberg) — Oil edged higher following its biggest drop in a week amid nervousness that fresh supply is about to hit a market still reeling from a resurgent coronavirus.
Futures in New York traded near $48 a barrel after falling 1.3% Monday even after President Donald Trump signed a $900 billion stimulus package into law. The OPEC+ alliance is set to add another 500,000 barrels a day of output to the market from January, while Russia’s deputy prime minister said last week the nation would support a further gradual increase in production in February.
The extra barrels are coming as virus-related stay-at-home orders and travel restrictions are being extended in many parts of the world. The discovery of a new and potentially faster-spreading Covid-19 strain in the U.K. has also raised concern that things will get worse before enough vaccines can be rolled out.
Crude’s vaccine-driven rally has faltered in the last couple of weeks on signs the surge in prices may have gotten ahead of the recovery in energy demand. The concern over the short-term outlook has been reflected in the futures curve, with Brent’s prompt timespread moving back into contango, a bearish structure where near-term prices are more expensive than later-dated ones.
OPEC+ will meet next week to decide on production levels for February, with traders looking out for indications of changing sentiment among its members. Over the longer term, Iranian plans to hike oil output next year may undermine the alliance’s efforts to raise production while avoiding flooding the market.
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