0236 GMT: Crude oil futures were higher during mid-morning trade in Asia Jan. 4 as market participants awaited a meeting set for later in the day between OPEC and non-OPEC ministers to discuss February production levels for pricing cues.
At 10:36 am Singapore time (0236 GMT), the ICE Brent March contract was up 34 cents/b (0.66%) from the Dec. 31 settle at $52.14/b, while the February NYMEX light sweet crude contract was 31 cents/b (0.64%) higher at $48.83/b. The markers had risen 0.9% and 0.6% in the week ended Dec. 31 to end 2020 at $51.80/b and $48.52/b, respectively.
The oil markets enter the first week of the new year immediately staring down the barrel of a risk event, with members of the OPEC+ alliance scheduled to meet later Jan. 4 to discuss oil production levels for February.
The meeting comes after the OPEC+ alliance agreed Dec. 3 to increase its collective production quota by 500,000 b/d from January 2021 and then meet monthly to determine if further increases were warranted. According to that agreement, each monthly adjustment will not exceed 500,000 b/d in either direction.
There is some nervousness in the market ahead of the meeting, as on Dec. 25 Russia's Deputy Prime Minister Alexander Novak floated the possibility of a 500,000 b/d increase.
Speaking at a delegate-level advisory committee on Jan. 3, OPEC Secretary General Mohammed Barkindo added to conflicting signals, saying the alliance's members were ready to usher in a "gradual return of 2 million b/d to the market over the coming months" but adding that the outlook for the first half of 2021 was "very mixed, and there are still many downside risks to juggle," S&P Global Platts reported earlier.
"There is currently a 50-50 chance that OPEC+ will maintain the January production cuts into February," Vandana Hari, CEO of Vanda Insights, told Platts Jan. 4.
"Even though the pandemic has continued to weigh on demand, there is an internal dynamic within the alliance which necessitates a phased return of production in order to maintain cohesion and this, along with a desire to keep shale growth in check, may force OPEC+ ministers to consider a decrease in cuts into February," she added.
Market participants hope the alliance will defer increasing production quotas, especially since the pandemic continues to cast a shadow over oil demand.
A new variant of the coronavirus, called B.1.1.7 and said to be up to 70% more transmissible, is spreading rapidly across the world, threatening longer and tougher mobility restrictions.
Analysts also noted that the oil market, along with the broader financial markets, was bracing for Georgia Senate run-off elections Jan. 5 in the US, as any political uncertainty from the elections could translate into price volatility, with price movements being exaggerated by the lack of liquidity that is a seasonal characteristic of this period.
