Oil steadies amid surging virus cases and U.S.-China tensions

A pump jack operates in front of a drilling rig at sunset in an oil field in Midland, Texas U.S.

On Monday, Oil prices steadied as traders showed the positive impact of an OPEC+ deal on production against rising coronavirus cases and heightened tensions between communist China and the United States.

  1. U.S. crude rose 12 cents to $46.38 a barrel. 
  2. Brent crude rose 3 cents to $49.28 a barrel by 1:10 p.m. EST (1810 GMT). 

Both oil deals gained around 2% last week after OPEC+, including the Organization of the Petroleum Exporting Countries (OPEC) and its allies, agreed to raise output slightly from January but continue the majority of existing supply curbs.

“They’re remaining a bit stingy in terms of supplies during the peak northern hemisphere winter,” stated John Kilduff, partner at Again Capital LLC in New York.

In a report, capital Economics, an economic research company, assumes OPEC+ output will increase by less than the new agreement allows because of compensatory cuts and limited first-quarter demand.

Following OPEC+’s deal, Morgan Stanley raised their long-term Brent price forecast to $47.50 a barrel from $45. They also revised up their long-term WTI price forecast to $45 a barrel from $42.50.

However, prices came under some weight after we exclusively reported that the United States was planning to impose sanctions on at least a dozen Chinese officials over their role in Beijing’s disqualification of elected opposition lawmakers in Hong Kong.

Rising tensions between China and the United States, the world’s top oil consumers, have weighed repeatedly on the business in recent years.

China, the world’s top crude oil importer, has eased support for crude markets this year through imports. In the first 11 months of the year, China took in a total of 503.92 million tonnes, or 10.98 million BPD, up 9.5% from the corresponding period last year.

The country’s November oil imports rose from a month earlier, data from the General Administration of Customs showed on Monday.

Meanwhile, a surge in coronavirus cases globally has forced a series of renewed lockdowns, including strict new rules in the U.S. state of California and South Korea, and Germany.

U.S. gasoline consumption fell during the Thanksgiving holiday week to the lowest in more than 20 years, OPIS said, as lockdowns weighed on fuel consumption.

Elsewhere, Iran has notified its oil ministry to prepare installations for the production and sale of crude oil at full capacity within three months, state media said on Sunday.

“Adding to the burden on oil prices is the potential Iranian increase to production in three months,” said Edward Moya, senior market analyst at OANDA. “Iran is optimistic the U.S. will ease restrictions if they return to the 2015 nuclear deal.”

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