0312 GMT: Crude oil prices ticked down during midmorning trade in Asia Dec. 15 on coronavirus pandemic concerns while a downward revision of OPEC's 2021 demand forecast also dampened market sentiment.
At 11:12 am Singapore time (0312 GMT), the ICE February Brent crude contract was down 22 cents/b (0.44%) from the Dec. 14 settle at $50.07/b while the NYMEX January light sweet crude contract was down 23 cents/b (0.49%) at $46.76/b. Both markers had risen 0.64% and 0.90% on Dec. 14 to settle at $50.29/b and $46.99/b, respectively.
The dip in prices came as an escalation of the pandemic portended a bleak demand outlook. States in the US have hinted at tougher movement restrictions after the COVID-19 death toll in the country surpassed 300,000. Asian countries like South Korea and Japan are fretting over surging infection numbers while Europe retreats further into lockdown.
The UK Health Secretary Matt Hancock announced Dec. 14 that London on Dec. 16 will be moved to Tier 3 restrictions, which will entail the closure of all hospitality venues including pubs, cafes and restaurants.
The Netherlands also entered into a strict five-week lockdown Dec. 15, shutting public places. Germany is slated to enter into lockdown on Dec. 16.
"The tightening lockdown restrictions are definitely putting some pressure on oil prices. However, the market may find some support from the next vaccine-related trigger, be it another approval or another round of vaccinations," Pan Jing Yi, market strategist at IG, told S&P Global Platts on Dec. 15.
Amid the pandemic gloom, OPEC in an oil market report Dec. 14 lowered its estimate of global demand by 1 million b/d for the first quarter of 2021 and 620,000 b/d for the second quarter.
The OPEC and its allies, after an agreement struck on Dec. 3, are poised to increase oil production by 500,000 b/d from January 2021 onward, and have agreed to meet monthly to decide if further supply adjustments are necessary. The next meeting will be on Jan. 4, 2021.
OPEC+ efforts to balance supply and demand in the oil markets may be complicated by the return of additional oil from Iran. State news agency IRNA reported on Dec. 13 that contingent on the US lifting sanctions, Iran is planning to produce 4.5 million b/d of crude oil and condensate in the year that starts March 21, and export 2.3 million b/d of it.
"Crude oil's strong start to the week faltered amid warnings of weaker demand ... This came after OPEC reduced its forecast for global fuel consumption," ANZ analysts said in a Dec. 15 note.
"The producer group will also have to contend with higher output from Iran," they added.
Meanwhile, negotiations over the US stimulus package remained stalled due to disagreements on the issues of state and local aid, and a COVID-19 "liability shield."
