Oil makes steady price

Various factors drive ANS, Brent above $50 for week; federal stimulus promised

Steve Sutherlin

Petroleum News

Oil prices are teasing at a new trading range above $50 per barrel.

Alaska North Slope crude closed at $51.25 on Dec. 15, up 84 cents on the day and above Brent crude, which closed at $50.73, down 44 cents.

West Texas Intermediate closed at $47.62, a gain of 63 cents on the day.

Brent traded at $51.13 and ANS at $51.61 at Petroleum News press time Dec. 16, while WTI traded at $47.82.

ANS and Brent have closed above $50 each day beginning Dec. 10.

An air of optimism surrounded oil trading desks as economic stimulus talks in the U.S. Congress appeared to gaining support across party lines.

On Dec. 16, Congress was said to be near a deal on a stimulus package nearing $900 billion, including the surprise addition of a new round of stimulus checks, albeit smaller than the last payments of $1,200 - part of the stimulus package passed in March.

U.S. Treasury Secretary Jay Powell, in a post-Federal Open Market Committee press conference Dec. 16 said that the Federal Reserve would also continue to add stimulus to the economy.

Essentially the Fed wants to see sustained inflation above its target - before it considers ending emergency policies. It committed to continue buying bonds until the economy reaches full employment and inflation stays at 2%.

The Fed will continue at least $120 billion a month in bond purchases, but it did not - as some investors were expecting - extend the duration of the bonds.

The Fed also voted, as expected, to maintain short-term borrowing rates near zero.

The stimulus news bolstered a rally sustained over the past few weeks by a wave of good news on COVID-19 vaccine approvals, and news that the first doses of the vaccines were being delivered throughout the United States and elsewhere in the world.

The COVID-19 vaccine rally has been held in check to an extent by concerns that increasing lockdowns due to widespread spikes in coronavirus infections may put a damper on demand recovery as the winter season plays out.

Most analysts in fact now do not expect vaccines to have a major impact on the demand scenario until mid-2021.

OPEC trims demand projections

Demand was adjusted down a marginal 9.77 million barrels per day from the cartel’s November assessment.

The December report was the first assessment released by OPEC since the organization and its affiliated producing countries, known as OPEC+, agreed to a 500,000-bpd production increase starting on Jan.1. Rather than instituting a scheduled increase of 2 million bpd, the group moderated its increase due to recent slower-than projected demand recovery.

Demand in Organization for Economic Cooperation and Development countries was revised down 0.18 million bpd, mainly due to lower transportation fuel demand in the United States and OECD Europe.

OCED woes were offset by an upward revision for non-OECD demand, of 0.16 million bpd.

A surprising pop in oil demand from China - staging steady recovery in various economic sectors - and a bit of demand pull from India support the rising assessment.

Total oil demand is estimated to reach 89.99 million bpd in 2020.

For 2021, world oil demand growth is revised lower by 0.35 million bpd, to growth of 5.90 million bpd. Total oil demand is projected to reach 95.89 million bpd in 2021.

Non-OPEC liquids production in 2020 was revised lower by 0.08 million bpd, month over month, to average 62.67 million bpd. The drop owed to downward revisions in Brazil, the United States, the UK and Norway, and was partially offset by upward revisions to production in Russia and Canada.

For the year, oil supply declined in Russia, the U.S. and Canada. Production in Norway, Brazil, China and Guyana is estimated to have grown.

Non-OPEC supply for 2021 was adjusted down by 0.1 million bpd, now forecast to grow by 0.85 million bpd to average 63.52 million bpd - mainly due to downward revisions in Russia’s output.

The main drivers for supply growth are expected to be the United States, Canada, Brazil and Norway.

OPEC crude oil production in November increased by 0.71 million bpd, month over month, to average 25.11 million bpd, according to secondary sources.