IEA says that resurgence in coronavirus cases slows oil demand rebound

IEA slashes oil demand forecast as fresh lockdowns temper with the recovery outlook in Q1

Oil
  • Lowers global oil demand forecast by 600k bpd for Q1
  • Lowers global oil demand forecast by 300k bpd for 2021 as a whole
  • Global oil demand expected to recover by 5.5 million bpd still this year
  • Global oil supply set to rise by more than 1 million bpd in 2021
  • This follows a 6.6 million bpd drop in 2020
  • There may be scope for higher supply growth given expected 2H 2021 demand improvement

I don’t think this comes as too much of a surprise given the way things have started off this year, with lockdowns still prevailing in Europe and some parts of the world.

The fear is that the vaccine timeline runs into trouble and tighter restrictions may still be needed in Q2 or perhaps even Q3 if things go awry in the coming months.
That will temper with the oil outlook further, although prices are not really all too shaken up as the market continues to keep with the reflation narrative for the time being.

Saudi Aramco will cut supply to Asia next month by around 25% less than sought

Bloomberg with the report that Saudi Aramco will supply less crude as part of long-term contracts next month

Some Asian processors will receive as much as 20%-30% less than they had sought
The newswire citing company officials who received the notices but asked not to be identified.

Goldman Sachs 2021 gold forecasts (to end the year higher … WTI forecasts too)

Goldman Sachs (Global Investment Research piece) projections for gold this year ahead, for various time horizons:

  • 3 months view: $2300
  • 6 months: $2300
  • 12: months $2300
Bizarre …. up then sideways???
WTI oil:
  • 3 months view: $45
  • 6 months: $49
  • 12: months $61

US weekly EIA oil inventories -8010K vs -2700K expected

Weekly US oil inventories

  • Prior was -6065K
  • Gasoline +4519K vs -900K exp
  • Distillate +6390K vs +1200K exp
  • Refinery utilization +1.3% vs +0.4% exp
Oil rose about 20-cents on the headlines as it focuses on the headline, not the product builds.
API late yesterday:
  • Oil -1633K
  • Gasoline +5473K
  • Distillate +7146K

OPEC agrees to raise production by 75K bpd in Feb and March

Draft statement released (update: Saudis to cut “in excess” of 400,000 bpd in Feb/March)

Draft statement released (update: Saudis to cut "in excess" of 400,000 bpd in Feb/March)
The OPEC+ agreement is that Russia will be allowed to raise production by 65K bpd and Kazakhstan by 10K bpd in each month.
We don’t know yet what cut Saudi Arabia is offering but they may take on that same amount. The net would be unchanged production through March, which is a big win for the global oil market when the baseline was a 1 mbpd increase over that timeframe.
I’d warn again that number isn’t in the statement so we’ll have to wait for a separate comment from Saudi Arabia. Update: Saudis to cut “in excess” of 400,000 bpd in Feb/March, according to Reuters.
At the same time, you have to frame that against increasing lockdowns and the growing threat of further lockdowns from here.
Still, we get two months of certainty before the March meeting and that takes some headlines risk out of the oil market.
It’s make-or-break time for crude. I’m betting on a break but $50 needs to give way.

Russia agrees to rollover current OPEC production – report

Oil higher on the report

Iran oil journalist Reza Zandi reports:
An informed source just told me that it appears that Russia has agreed that there won’t be any increase of 500 thousand bpd for the month of February, but, not the cessation of increase for the month of March.
If Iran can somehow enter the market in February, the situation for the month of March will be complicated
WTI is at the highs of the day, up $1.07 to $48.69.
The OPEC meeting gets back underway at the bottom of the hour.
Update: Another more-mainstream report is now saying the same thing and oil has risen further, to $49.00.

For the oil traders – the OPEC+ meeting resumes again from 1430GMT

The Monday meeting dragged on until it was clear there would be no conclusion, so it is to continue Tuesday.

Adam had the heads up earlier:
  • OPEC to extend meeting until tomorrow – will start at 15:30 Vienna time.
The long story short is the two big players:
  • Saudi Arabia argued against more output citing demand drop from new lockdowns
  • Russia led calls for higher production, citing recovering demand

OPEC haggling keeps the oil market on edge Mon 4 Jan 2021 13:37:07 GMT

Crude unchanged after earlier jump

Crude unchanged after earlier jump
Brent hit $53.33 and WTI rose to $49.83 earlier but both have given back about $1.40 and are unchanged on the day.
OPEC+ is meeting today to decide whether to stick with the plan of returning another 500,000 barrels per day of production to the market in light of fresh lockdowns and the virus surge.
One report, citing a  source close to the talks said just before today’s meeting that Russia and UAE are insisting on the 500 thousand bpd increase in production but Saudi Arabia, Kuwait and Algeria are pushing to leave production unchanged.
The baseline in the market is for an increase but another report says there is “lots of chatter” about keeping current production levels.
In the bigger picture, 26 of the 29 commodities in the CRB index are higher today with coffee, aluminum and nickel as the only laggards. On top are silver and natural gas.

OPEC sees plenty of downside risks for oil markets in the first half of 2021

Comments from OPEC Secretary-General Barkindo over the weekend, via Reuters.

OPEC meets with its “+” allies on Monday, including of course Russia. Discussions will centre on output levels for February.
“Amid the hopeful signs, the outlook for the first half of 2021 is very mixed and there are still many downside risks to juggle,” said Barkindo.