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Oil prices down 1% as OPEC+ debates 2021 output policy

Oil fell about 1 per cent on Monday on uncertainty about whether OPEC+ would agree to extend its deep output cuts at talks this week, but COVID-19 vaccine hopes kept crude benchmarks on track to rise by more than 25 per cent in November.

Brent crude for January delivery, which expires on Monday, dropped 47 cents, or 1%, to $47.71 a barrel by 11:15 a.m. EST (1615 GMT). The more actively traded February Brent contract was down 48 cents at $47.77.

U.S. West Texas Intermediate crude for January fell 35 cents, or 0.8%, to $45.18 a barrel.

Oil prices have climbed this month, on track for their biggest monthly gains since May, as vaccine developments raise hopes for an economic recovery that could boost fuel demand.

The Organization of the Petroleum Exporting Countries, Russia and others, known as OPEC+, plan to hold wider talks on Tuesday after discussions of key ministers on Sunday failed to reach a consensus.

“When OPEC punted until tomorrow to make a final decision, the market got nervous and started to sell off,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

OPEC+ is due to ease existing production cuts by 2 million barrels per day (bpd) from January, but an uneven recovery in global demand has prompted a rethink.

Algerian Energy Minister Abdelmadjid Atta said members have agreed on the need for a three-month extension and will work on convincing their allies in OPEC+ to support the move.

Demand has recovered in Asia but not Europe and the Americas, presenting OPEC+ with a “challenging choice on whether to delay or bring back more oil,” said FXTM analyst Hussein Sayed.

Goldman Sachs said a winter surge in COVID-19 cases would not prevent the oil market rebalancing as a result of vaccine progress. It saw Brent rising to $65 in 2021.

A Reuters poll of 40 economists and analysts forecast Brent would average $49.35 a barrel next year.

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