Oil Remains Under Pressure Amid Virus Fears

Oil Video 22.12.20.

The New COVID-19 Strain Continues To Put Pressure On Oil

Oil did not manage to rebound after yesterday’s sell-off and is trying to settle below the $47 level. This is not surprising as demand for oil in Europe will decrease in the next few weeks due to the new COVID-19 strain.

Currently, Britain is talking with EU on opening borders for freight and allowing its citizens to return home for Christmas. It remains to be seen whether these negotiations will be successful but it looks like EU is ready to work on the deal which will allow trade to resume.

While EU and UK may be able to negotiate a deal on borders before Christmas, the new strain itself is a new problem for oil. At this point, scientists do not have enough data to tell whether vaccines will be effective against the new strain.

All vaccine developers have already started to work on this issue but the research will take time. Meanwhile, traders will likely apply a discount to travel-sensitive assets since countries will have to keep additional virus containment measures until they have enough data on the new strain.

This is clearly bearish for oil in the near term, but oil may still have a chance to continue its upside move if traders focus on the longer-term outlook.

OPEC+ Promises To Meet Frequently To Keep Its Hand On The Market Pulse

OPEC+ will increase its oil production by 500,000 barrels per day (bpd) at the beginning of the next year at a time when the world economy remains under pressure from the second wave of the pandemic and has to deal with a new strain of the virus.

According to recent reports, OPEC+ is ready to meet frequently in order to monitor the state of the market.

At this point, it looks like OPEC+ will not be able to increase its production in February as January is set to be a challenging month for oil demand in Europe.

However, the market may interpret OPEC+ readiness to keep a constant dialogue as a sign that the group is ready to cut production again if necessary, which could serve as a supportive factor for the market.

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