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Crude ends year at two-week high as market looks to OPEC+ meeting

Highlights

OPEC+ ministers meet Jan. 4 to set February quotas

Crude forward curve strengthens

US oil, gas rig count falls by six to 407

New York — Crude oil futures rode a late session upswing to end 2020 higher, as the market looked to a Jan. 4 OPEC+ meeting for next direction.

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NYMEX February WTI settled 12 cents higher at $48.52/b and ICE March Brent climbed 17 cents to settle at $51.80/b.

With oil markets closed Jan. 1 for the New Year's Day holiday, the next driver is likely to be the OPEC+ group meeting Jan. 4, when ministers will decide on production quotas for February.

Russian Deputy Prime Minister Alexander Novak floated the possibility Dec. 25 of another 500,000 b/d increase for February, the maximum monthly amount allowed under the rules set by the alliance for the first half of 2021.

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Algerian energy minister Abdelmadjid Attar, however, said days later that members should remain cautious, with the emerging new virus strains likely to weigh on global oil demand.

"Is the oil demand forecast for [the first-quarter] better than that forecasted in early December? I don't believe so, with the lockdown in many countries in Europe until the end of January," one delegate told S&P Global Platts, asking not to be named. "It would be more reasonable not to increase production in February."

Front-month Brent and WTI settled at the highest level since Dec. 18.

The crude forward structure turned more bullish amid improved fundamental outlooks. The front-month and sixth-month NYMEX WTI contracts settled at parity Dec. 31, eliminating a contango that had persisted since Feb. 21. Meanwhile, the roll of the front-month ICE Brent contract to March pushed the entire Brent curve into backwardation save for the second-month contract, which settled at a 2 cent/b contango compared with the front month.

NYMEX January RBOB settled 36 points lower at $1.4084/gal and January ULSD settled down 1.35 cents at $1.4763/gal.

The US oil and gas rig count fell by six to 407 in the week ended Dec. 30 as 2020 ended with activity down slightly more than 50% from the prior-year point, rig data provider Enverus said.

Total oil rigs dropped by seven to 293 on the week, while total gas rigs rose by one to 114. The number of horizontal rigs, which generally indicate high-producing shale/unconventional formations, was up five to 335.

But even as rig activity ended 2020 at a much lower level than where it began, total oil and gas rigs were up 30% in Q4 from Q3. The industry's confidence has been buoyed with new vaccines against the coronavirus pandemic beginning to be distributed.