Today oil prices experienced a characteristic swing, caused by how sometimes trading focuses on different news when it moves from East to West.
Early trading focused on the tightening lockdowns in Europe, and prices declined as the market feared the prospect of more demand destruction that these restrictions will bring.
The festive season can also be the perfect storm for more infections due to the seasonal gathering of families and friends, so there is fear that things could get a bit worse before infection rates drop again.
Projections from the IEA that it could take several months for the vaccination campaigns to benefit oil demand also helped contain any positive market sentiment.
However, after the initial negative move, prices increased later in the day due to the first vaccination campaigns in the UK, Canada and the US ,and climbed back to levels reached also on Monday, recording some gains compared to the last closing price.
Looking at prices over the last few days, we can now see that they hover just over the 50-dollar mark, largely stable as swings from gains to losses cancel any significant move, creating a comfortable level for the market until things get better.
The downside to prices at the moment can come from storage indications, with the first projections about US stocks coming later today from the API institute, or from a possible infection spike during the festive season.
If we see infections rising after Christmas and New Year’s eve, then 2021 may not start very merry. It remains to be seen how the existing lockdowns, which are planned shockingly strict taken the social importance of the season, will discourage social gatherings.
During December there is not much else happening that could help prices meaningfully rise further, quite the opposite, so it will be really positive for the market if it enters 2021 with the Brent marker showing above 50 dollars.
In early January though, there is an OPEC+ meeting, which requires quite a sober approach from its members and decisions coming from the alliance on production levels from February will likely be the next mover for a market rally.
