The course of the coronavirus continued to roil the oil markets last week. After a 10 percent gain since the beginning of the year, oil reversed last week as new outbreaks of the virus accompanied by recent lockdowns appeared worldwide. Reports that China has been forced into new lockdowns and that a new and possibly more lethal variant of the virus is spreading across Europe added to concerns. Delays in the delivery of vaccines are also causing worries that the impact of the virus will continue a while longer.
Prices, which hit their highest in nearly a year the previous week, posted their first weekly decline of 2021 last week. Brent was down 1.6 percent on the week, and US crude down about 0.4 percent. Producers face unprecedented challenges balancing supply and demand with other factors involving vaccine rollouts versus lockdowns, strong equities, a weaker dollar, and robust Chinese demand.
Oil posted the biggest weekly gain since late September as Saudi Arabia’s plan to slice output spurred a surge in physical crude buying. In New York, futures advanced $3.72 this week, and Brent oil topped $55 a barrel for the first time since February. Last week’s pledge from Saudi Arab to cut production by 1 million b/d in February and March has made for a tighter supply outlook sooner than anticipated. Meanwhile, prospects for additional stimulus under a Biden administration spurred broader market gains.
Crude futures rode a late session upswing to end 2020 higher, as the market looked to a Jan. 4th OPEC+ meeting for direction. WTI settled at $48.52, and Brent settled at $51.80. With oil markets closed on Jan. 1st for the New Year’s Day holiday, the next driver will likely be the OPEC+ group meeting when ministers will decide on production quotas for February. Russian Deputy Prime Minister Novak floated the possibility of another 500,000 b/d increase for February, the maximum monthly amount allowed under the rules. Global crude oil markets lost about a fifth of their value in 2020 as coronavirus lockdowns paralyzed much of the worldwide economy.