Oil prices today are modestly rising on hopes that OPEC+ will decide to postpone its planned production increase in January and on the latest vaccine euphoria.

Today’s rise though is tricky, as the vaccine news and OPEC+ stepping in have largely been priced in already.

One would think that yesterday’s JMMC meeting outcome to avoid a clear recommendation was actually more of a bummer for traders who needed reassurance.

Although OPEC+’s statements were not hostile to keeping oil production levels where they are if needed, traders did not see a clear-cut recommendation and this carries a downside risk for prices in coming days.

Another reason that today’s gains have a risk to be reversed is signs that US stocks are rising more than expected, after the API institute published its latest inventory data. API is not always accurate of course and it could be wrong. Similarly to last week.

Yet our own data in Rystad Energy point to a growing imbalance between demand and supply and this is definitely not bullish for prices.

The OPEC+ meeting called upon “members to be ready to act to the requirements of the market.” It is OPEC action that will solidify price levels and ensure the gains are here to stay. And this action is yet to come.

The current agreement opens for an increase in production, with the collective output target rising by nearly 2 million bpd from 36.2 to 38.2 million bpd from Jan-21.

However, we expect production to creep marginally higher to year-end 2020 led by Iraq and Kazakhstan, making the starting point into 2021 slightly higher than the 36.2 million bpd target.

What OPEC+ will decide to do with the roughly 2.5 million bpd of cuts the laggard countries “owe”, nobody has really talked publicly about so far. Most likely they could be part of a new deal in 2021, as it will be unfeasible for Russia, Iraq and Kazakhstan to cut these in Jan-21.

OPEC+ will likely center discussions around a 3 to 6-month extension of the current target production.

The group knows very well that a failure to extend the current target production, and not increase production according to the current agreement, will be met with a negative oil price reaction which they seek to avoid.

The only clearly bullish items for the market to hang on today are positive signs from China, as the country’s positive vaccine tests and supportive economic indicators point to a recovery of one of the world’s biggest oil consumers.

In the US, fiscal stimulus negotiations in the Senate are getting rejuvenated by the Democrats, which is positive, but we have a long way to go for such a package to be agreed upon and offered to the real economy.