OIL FUTURES: Crude steady as market weighs supply outlooks against rising pandemic risks

New York — Oil futures settled mixed Dec. 8 after a directionless session as the market pitted the rising threat of pandemic lockdowns against forecasts of tighter oil markets in 2021.

NYMEX January WTI settled 16 cents lower at $45.60/b, while ICE February Brent was up 5 cents at $48.84/b.

The US Energy Information Administration, in its monthly Short Term Energy Outlook released Dec. 8, revised its outlook for crude prices sharply higher from the month prior, citing an OPEC+ decision to partially extend production quotas into 2021.

The EIA expects Brent crude prices to average $48.50/b in 2021, up $1.91 from its November forecast of $46.59/b.

WTI crude prices are expected to average at $45.75/b next year, up $1.51 from November's forecast of $44.24/b.

The EIA cited the OPEC+ decision to boost production by just 500,000 b/d in January, instead of a scheduled 1.9 million b/d, as the reason for the upward revision. The move will lead to a tighter oil market in 2021, especially during the first quarter, the EIA said. As a result, the EIA now forecasts global oil inventories will draw on average 1.8 million b/d throughout the first quarter, an upward revision of 1 million b/d from November's outlook.

NYMEX January RBOB settled 1 point higher Dec. 8 at $1.2559/gal, and January ULSD climbed 75 points to settle at $1.4067/gal.

But the threat of more pandemic lockdowns capped upward price movement.

"The big cities in the US are getting hit hard again by the virus and that could translate into longer lockdowns that will deliver a bigger hit to fuel demand over the next couple of months," OANDA senior market analyst Edward Moya said in a note. "Vaccine implementation across the US and Europe will be key for how quickly the crude demand outlook improves next year."

Washington Governor Jay Inslee on Dec. 8 announced that the state would be extending its lockdown measures for three weeks beyond an initial Dec. 14 expiration as the state battles rising case numbers.

Global coronavirus cases rose by 533,000 to nearly 68 million on Dec. 7, according to data from John Hopkins University. Some 200,000 of the new cases were in the US and 153,000 were across Europe. The UK began administering COVID-19 vaccines on Dec. 8.

In the US, which has yet to approve a vaccine, the seven-day moving average of coronavirus-caused deaths hit a fresh all-time high of 2,171 on Dec. 7, according to data from The Covid Tracking Project.