Oil Falls From Nine-Month High With Dollar Strengthening
December 7, 2020 EnergyNow Media
By Sharon Cho and Alex Longley
(Bloomberg) Oil fell from its strongest close in nine months, hampered by weaker risk sentiment in global markets. Crude futures were down 1.9% in New York, with the dollar trading higher and European stock markets declining. It follows a rally last week after OPEC and its allies agreed to add 500,000 barrels a day of output from January to a market that’s showing signs of recovery. In the short-term, there are indications that consumption in Asia remains robust. Saudi Arabia raised oil pricing for the region, a signal the kingdom is confident demand is strong enough to absorb the small boost in supply. China’s economy appears robust, with exports rising the most since early 2018 last month to jump more than 20% in dollar terms.
The future path of crude prices now looks to be heavily dependent on how quickly Covid-19 vaccines can be rolled out, with indications most Americans will be able to get one by the second quarter of 2021. OPEC+ is facing more potential supply challenges, however, as Libya continues to ramp up production and as Iran prepares to raise oil exports in a sign the Islamic Republic expects the U.S. to ease some sanctions under a Joe Biden presidency.
“The oil market will see better days in 2021, it’s almost certain, but it still has to overcome a short-term hurdle for a couple of months until demand picks up, and this will constrain prices for the time being,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
West Texas Intermediate for January delivery declined 1.9% to $45.39 a barrel as of 9:11 a.m. in London
Brent for February fell 1.6% to $48.48
The effects of the demand recovery in Asia are also rippling around the world. Rising buying interest from the region has pushed up physical prices for North Sea oil, with Forties crude climbing to the highest level since late August.
Indian Oil Minister Dharmendra Pradhan said last week the country would like to buy from more producers when asked if he would like to see an easing of White House sanctions on Iran and Venezuela. There’s also been a rise in inquiries from China about purchasing a sludgy type of oil known as bitumen-mix, thought to be Venezuelan crude passed off as another grade, traders said.
Other oil-market news:
The U.S. is preparing to sanction at least a dozen more Chinese officials over their role in the recent disqualification of Hong Kong legislators, according to two people familiar with the plans.
Vitol Group backed last week’s decision by OPEC+ to ease oil-output cuts gradually, saying energy demand would remain fragile until the roll-out of coronavirus vaccines.
The official selling price of Arab Extra Light was set at parity to the more dense and sulfurous Arab Heavy for January sales to Asia, according to OSP data compiled by Bloomberg. That’s the first time the two grades have been at the same level since May.
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