Oil Gains Ground As Stimulus Hopes Offset Virus Worries

Oil Video 29.12.20.

Russia Is Ready To Revise The Production Cut Deal If Demand Recovers Faster Than Expected

On Monday, Russian Deputy Prime Minister Alexander Novak, which is Russia’s chief oil negotiator, stated that the OPEC+ production cut deal could be revised if demand recovered faster than expected.

A few days ago, Reuters published Novak’s comments which indicated that Russia supported another oil production increase of 500,000 barrels per day (bpd) in February 2021.

Previously, OPEC+ was set to increase its oil production by 2 million bpd in January 2021 but the second wave of the virus forced it to revise the deal and negotiate a modest production increase of 500,000 bpd.

At this point, it looks like Russia wants OPEC+ to gradually increase oil production in order to reach the production increase of 2 million bpd in April 2021.

It is also clear that Russia is ready to boost its oil production at the first signs of improved demand. Novak stated that oil price levels between $45 and $55 per barrel were comfortable enough to start increasing production. Currently, major benchmarks like Brent and WTI are trading inside this range.

Most likely, many OPEC+ members are mostly happy with current oil price levels as they are not attractive enough to boost U.S. shale oil production. Recent EIA data indicated that U.S. oil production remained at the 11 million bpd level, and this production level is comfortable for the market at this point.

Stimulus Hopes Provide Support To The Oil Market

The situation on the coronavirus front remains challenging, and the outlook for oil demand in the first month of 2021 is rather bleak. However, traders prefer to focus on the new U.S. coronavirus aid package which may be increased if the U.S. Senate approves $2,000 stimulus checks after a successful vote in the House.

The oil market remains in a bullish mode, and  it looks that only serious negative developments on the virus front may deal significant damage to oil prices.

However, the current optimism may soon get tested as the first week of 2021 will likely bring worrisome virus data from Europe due to the impact of holidays.

The oil market has previously managed to ignore all bad news about additional virus containment measures, but it remains to be seen whether it will be able to keep going higher at a time when OPEC+ increases its production by 500,000 bpd.

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