Recap: Oil futures gained traction for the second straight session, supported by a larger than expected draw in U.S. crude oil inventories and the roll out of coronavirus vaccines. However, gains were kept at bay by an abundance of supply amid faltering demand. Apart from this, the passage of a second economic stimulus package in the U.S. has raised trader optimism that forward demand would increase as the economy becomes healthier. This, along with a weak dollar has held a floor under oil markets. Having said all that, it remains to be seen how quickly and how healthy the global economy becomes. February Brent crude futures settled up 25 cents to $51.34 a barrel, off the session high of $51.56 and well lower than the $66 price that started the year. WTI for February delivery settled up 40 cents to trade at $48.40, down substantially from about $62 at the start of 2020. January RBOB rose 1.2% to $1.404 a gallon, while January heating oil was down 0.3%, $1.4816.
Technical Analysis: WTI experienced an outside trading session and achieved a higher settlement. This typically means higher prices, which we would not discount however; we do not expect the move to be too aggressive, as it is the last trading day of the year. The 10-day moving average continues to act as a level of support and will most likely hold on to that position. This average is currently set at $47.80, with additional support at $44.53, the 50-day moving average. Resistance is set at $50.
Fundamental News: Baker Hughes said the oil and gas rig count increased by 3 to 351 in the week ending December 30th. During December, the total rig count increased by 31, its fifth monthly increase in a row. For the quarter, the count was up 90, the most in a quarter since the second quarter of 2017 when it increased by 116 rigs. U.S. oil rigs increased by 3 to 267 this week, their highest since May, while gas rigs remained unchanged at 83, their highest since the end of April.
Two OPEC+ sources stated that OPEC+ compliance with a global oil supply cut deal stood at 101% in November. One of the sources said OPEC members' compliance reached 104% while compliance was at 95% for their allies, including Russia.
A Suncor spokeswoman said two workers have been killed in a vehicle collision at Suncor Energy's Fort Hills oil sands mine in northern Alberta on Wednesday, prompting the company to pause mine operations while an investigation is underway.
IIR Energy reported that U.S. oil refiners are expected to shut in 3.7 million bpd of capacity in the week ending January 1st, increasing available refining capacity by 166,000 bpd from the previous week. Offline capacity is expected to fall to 2.5 million bpd in the week ending January 8th.
The Association of American Railroads reported that railcar loadings on major U.S. railroads in the week ending December 30th fell by 3.4% to 185,029. It reported that petroleum and oil products railcar loadings fell by 9.3% to 10,296.
On Wednesday, Britain became the first country in the world to approve a coronavirus vaccine developed by Oxford University and AstraZeneca. Britain has already ordered 100 million doses of the vaccine, and the government said it had accepted the recommendation from the Medicines and Healthcare products Regulatory Agency (MHRA) to grant emergency authorization. The approval is a vindication for a shot seen as essential for mass immunizations in the developing world as well as in Britain, but one that has been dogged by questions about its trial data that make it unlikely to be approved very soon in the European Union or the United States.
Early Market Call – as of 8:50 AM EDT
WTI – Feb $48.01, down 39 cents
RBOB – Jan $1.3978, down 1.42 cents
HO – Jan $1.4704, down 1.95 cents
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