Oil Continues To Trade Below The $46 Level Amid Virus Fears

Oil Video 08.12.20.

OPEC+ Will Hold Talks At The Very Beginning Of 2021

Argus has recently reported that OPEC+ ministers will meet on January 4, 2021 to discuss the group’s production plans for February.

The group’s recent decision to boost production by 500,000 barrels per day (bpd) in January 2021 and move to regular monthly assessments of the market situation provided some support to oil prices.

At the same time, the market looks worried about near-term problems on the virus front. As a result, oil failed to settle above the $46 level.

Today, Britain started its mass vaccination program, but it looks like the oil market has already priced in positive vaccine-related news. In the longer term, vaccine optimism should still provide sufficient support to oil but the market may be sensitive to additional negative developments on the virus front.

At this point, it look like post-Christmas period will be very important for the oil market. Most developed economies plan to relax their virus containment measures for Christmas and ramp them up right after holidays. If oil gets through this period without much damage, it should have a good chance to settle above the psychologically important $50 level.

Market’s Focus Will Likely Shift To U.S. Oil Production Dynamics

The future level of U.S. domestic oil production is one of the few unknown variables for the oil market at the end of this year. Several important catalysts are already well known – OPEC+ decided to boost production by 500,000 bpd in January 2021 while  several vaccines will be approved in December.

In this situation, the market will watch whether the recent oil price upside boosts U.S. oil production and leads to increasing inventory levels.

The recent EIA Weekly Petroleum Status report indicated that U.S. oil production increased to 11.1 million bpd. In case U.S. production starts to move towards 11.5 million bpd, oil may find itself under some pressure.

Soon, traders will have a chance to take a look at the latest inventory data in the API Crude Oil Stock Change report. Analysts expect that inventories declined by 1.5 million barrels, but it should be noted that recent API reports differed significantly from EIA data.

For a look at all of today’s economic events, check out our economic calendar.