Month in brief

• DOI: http://doi.org/10.1111/oet.12832
• Date: 01 January 2021
• Published date: 01 January 2021

THE MONTH IN BRIEF

Month in brief

Oil prices rose steadily through the first half of December

on anticipation of a rapid Covid-19 vaccine rollout, peaking

at over $52/bbl for March Brent on 18th December—after

which it eased back but stayed above $50/bbl. The month

began, however, on a bearish note, with oil prices falling

on Tuesday 1st December amid uncertainty surrounding

an expected extension of OPEC-plus production quotas,

after the group delayed a planned meeting by 2 days until

December 3rd. The delay followed disagreements between

Saudi Arabia and the UAE over how quotas would be man-

aged and enforced. March Brent fell 55 cents to $47.40/bbl

on the first, before rising over the following few days as a

deal finally materialized—reaching $49.19/bbl by the end

of the week. The group agreed to reduce production cuts by

an initial 500 000 bpd in January, rather than the full

1.9 mn bpd planned in the spring. Further increases of

500 000 bpd could be made each month after that, up to a

total of 2 mn bpd, depending on market conditions.

Oil prices then settled lower the following Monday as

near-term demand outlooks came under pressure from

rising Covid-19 case numbers in the United States and

Europe. Prices stayed fairly flat for the next 2 days, with

optimism over vaccines offset by the rising case numbers,

along with an increase in US commercial crude stocks of

over 15 mn bbl on 9th December—their largest weekly

gain since May. Then on Thursday 10th, there was a

sharp rise to above $50/bbl for March Brent on more pos-

itive vaccine news, as well as signs of rising demand in

Asia, where Covid-19 case numbers were holding well

below the United States and Europe. But prices then lost

ground again on the final day of the week (11th) as

United States and European demand came under further

pressure, with US pandemic lockdowns spreading and

the US Congress deadlocked on stimulus spending.

The third week saw a steady rise in prices, with March

Brent peaking at $52.26/bbl by the end of the week—

bringing prices back to almost prepandemic levels. The

main bullish factor was progress on the approval of

Covid-19 vaccines in the United States, with the Pfizer-

BioNTech vaccine approved over the weekend, followed

by emergency approval of the Moderna vaccine on the

15th and formal approval 2 days later. The news also

boosted equity markets, although analysts noted that a

fully successful vaccine roll out had been priced in by the

end of the week, leaving little room for any slip-ups. The

upside for crude was capped by continued concerns over

demand, with the IEA cutting its demand outlook for

2021 midweek.

Prices then fell back early in the Christmas week on

news of a new more contagious, mutant strain of Covid-

19 in the United Kingdom, which led to a rapid rise in

infection numbers, and new restrictions that will hit oil

demand. But positive news on vaccines, including

approval of the UK's cheaper Oxford/Astra-Zeneca jab,

helped balance sentiment in thin trading over the holiday

period, leaving prices close to their mid-month peak, at

$51.80/bbl by the close on New Year's Eve.

How to cite this article: Month in brief. Oil and

Energy Trends. 2021;46:6. https://doi.org/10.1111/

oet.12832

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