Oil drifts lower ahead of OPEC+ decision on output curbs

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Oil futures edged lower early Monday to kick off 2021, as traders await a meeting of the Organization of the Petroleum Exporting Countries and its allies that will see major producers decide whether to further relax output curbs that helped oil finish last year on a strong note.

West Texas Intermediate crude for February delivery
CL.1,
-0.25%

CLG21,
-0.25%
fell 30 cents, or 0.6%, to $48.22 a barrel on the New York Mercantile Exchange. March Brent crude
BRNH21,
+0.27%,
the global benchmark, was down 14 cents, or 0.3%, at $51.66 a barrel on ICE Futures Europe.

“We believe that in the current environment, where there are real concerns over the latest waves of COVID-19, the best route for OPEC+ to take is to keep output cuts unchanged at current levels,” said Warren Patterson, head of commodities strategy at ING, in a note.

“Despite the strength in the flat price and spreads, the market is still clearly vulnerable, and adding further supply risks a pullback in prices,” he said.

OPEC+ in December voted to relax curbs by 500,000 barrels a day beginning on Jan. 1. Members will decide Tuesday whether to relax those curbs, which now stand at 7.2 million barrels a day, by another 500,000 barrels beginning in February.

The U.S. saw at least 201,476 new COVID-19 cases on Sunday, and at least 1,353 people died, according to a New York Times tracker. In the last week, the U.S. has averaged 212,893 cases a day, down 1% from the average two weeks ago. Analysts note that numbers are often undercounted at the weekend because staffing at many centers is reduced. There are currently a record 125,544 COVID-19 patients in U.S. hospitals, according to the COVID Tracking Project, breaking the record set on Dec. 31.

Meanwhile, the rollout of vaccines in the U.S. fell significantly behind schedule. The Trump administration had set a goal of administering 20 million doses of the vaccine before the end of 2020. In the end, fewer than 2.8 million doses had been administered as of Dec. 31, according to the CDC.

Market bulls had momentum on their side to end the year. WTI saw a 7% rise in December, contributing to a gain of more than 20% for the fourth quarter, according to Dow Jones Market Data. Brent crude rose 8.9% in December and 26.5% in the final quarter of the year.

That still left crude prices down significantly for 2020 after demand was crushed by the COVID-19 pandemic. WTI ended 2020 down 20.5%, while Brent crude declined 21.5%.

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