NYMEX crude gets a boost from Brexit deal

Crude futures were largely rangebound and slightly bullish in preholiday trade Dec. 24, getting a lift on a preliminary Brexit deal.

NYMEX front-month crude settled at $48.23/b, up 11 cents.

In refined products, NYMEX front-month RBOB settled at $1.3789/gal, down 31 points, while front-month ULSD settled at $1.49/gal, down 75 points.

NYMEX crude climbed from its intra-day low of $47.56/b, following a softer US dollar, on news that the UK and European Union had come to a Brexit trade deal.

The deal provides for trade free from tariffs and quotas as the UK breaks away from the EU's single market and customs union.

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However, the crude futures climb was capped by continued demand concerns as new strains of COVID-19 and escalating lockdowns weighed on economic sentiment. Europe and especially the UK remain in the grip of coronavirus-induced lockdowns.

The political debate over US fiscal relief measures was continuing after US President Donald Trump demanded changes to the Congress-approved stimulus package.

However, analysts said oil-market participants still expect a stimulus deal to eventually be squeezed out.

"The market seems to have largely overlooked President Donald Trump's rejection of the stimulus package as, despite all the to and fro, the expectation is that a stimulus deal will still emerge and there is a possibility that this deal could be even bigger," said Jeffrey Halley, senior market analyst at OANDA.

While crude futures were somewhat rangebound Dec. 24, prices have found support at levels last seen in February, prior to the most severe global coronavirus travel restrictions.

NYMEX front-month crude is nearing the $50/b level, where many US producers had said they could be profitable earlier in the year. However, that was before the coronavirus hammered global oil demand, and producers will be in no rush to turn on the spigots at $50/b.

While coronavirus vaccines are being distributed, US producers will likely be concerned about jumping the gun on production until they see stronger signals of sustained demand growth.

US producers will also be keeping an eye on OPEC+ output plans. The OPEC+ monitoring committee is scheduled to meet Jan. 4 to determine February output.

The OPEC+ coalition agreed on Dec. 3 to raise their aggregate crude production by 500,000 b/d in January and meet monthly to decide subsequent output levels.

S&P Global Platts Analytics has revised its global supply outlook higher for 2021 based primarily on the return of OPEC+ output.

Platts Analytics sees global oil supply growing by 3.8 million b/d in 2021, following a 7.1 million b/d decline in 2020, and up 300,000 b/d from its prior forecast.

"US supply is in decline now due to low drilling and completion activity, but is revised up from last month's case due to faster-than-expected recovery in frack crews," said Platts Analytics analyst Ash Singh in a report.

US crude and condensate production will likely average 10.44 million b/d in 2021, down 800,000 b/d on the year, before rising to 12.8 million b/d by late 2023, according to Platts Analytics.