Oil falls back on tightening restrictions despite OPEC+ hopes

OIL PRICE - LONDON. Oil prices fell back on Tuesday after being buoyed by expectations that OPEC+ producers would keep supplies tight and news of a second promising COVID-19 vaccine as tightening coronavirus-driven restrictions spurred caution.

Brent and West Texas Intermediate crude were both up by about 40 cents before falling into negative territory.

Brent was down 3 cents, or less than 0.1%, at $43.79 a barrel by 1213 GMT while WTI was down 5 cents, or 0.1%, at $41.29.

"Oil prices enjoy modest gains this morning, as enthusiasm over a new, seemingly more efficient, vaccine has led a new price rally," said Rystad Energy's head of oil markets, Bjornar Tonhaugen.

"Now all eyes are on possible leaks from today’s OPEC+ technical meeting," he added.

OPEC+, which groups the Organization of the Petroleum Exporting Countries, Russia and others, holds a ministerial committee meeting on Tuesday that could recommend changing quotas for next year when all the ministers meet on Nov. 30 and Dec. 1.

OPEC+ has lowered its outlook on oil demand growth for 2021, a confidential document seen by Reuters shows, supporting the case for a tighter policy on output next year.

Brent and WTI have risen more than 10% in the last six days after Pfizer said its COVID-19 vaccine was more than 90% effective. Prices had a further boost this week when Moderna said its vaccine was 94.5% effective. "Developments with regards to a vaccine are constructive for oil demand in the medium to long term. However, for the near term it changes little, with still plenty of concern over the demand impact from the latest wave of COVID-19," said ING commodity strategist Warren Patterson.

Near-term economic outlook remains hazy as the grip of the virus grows stronger, with Sweden moving to restrict the size of public gatherings and a British medical adviser suggesting strengthening the three-tier system of restrictions when the full lockdown in England ends.

But China's crude oil throughput in October rose to its highest level, underpinning a fast demand recovery.

"Oil demand in China is exceeding pre-COVID-19 levels which suggests oil demand is not permanently impaired," analysts from Bernstein Energy said, saying this supported data indicating "oil demand has not been structurally damaged" by the pandemic.

The Iranian government eyes oil price of $40 a barrel for its budget for next year, although the figure was not final yet. It is hopeful that U.S. President-elect Joe Biden will lift U.S. sanctions on its energy sector which would boost Iran's crude exports.