Overnight Oil Report 1/8/2021: Oil bulls win again

ENB Publishers Note: Bull’s in Asia and Europe drive oil price to $51.66 for the high on the overnight session as traders shake off COVID-19  concerns…

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Singapore — 0242 GMT: Crude oil futures ticked up during the Asian mid-morning trade Jan. 8, but a rally driven by Saudi Arabia’s decision to cut output by 1 million b/d and the Democrats seizing control of the US Senate started to cool as pandemic concerns reasserted themselves.

At 10:42 am Singapore time (0242 GMT), the ICE Brent March contract was up 29 cents/b (0.53%) from the Jan. 7 settle to $54.67/b, while the February NYMEX light sweet crude contract was up 32 cents/b (0.63%) at $51.14/b. Both markers had risen by 0.15% and 0.40% on Jan. 7 to settle at $54.38/b and $50.83/b, respectively.

Crude oil prices have been supported by a confluence of positive developments this week, which have continued to contribute to bullish sentiment early Jan. 8.

The most significant of these was Saudi Arabia announcing at the end of the Jan. 5 OPEC+ meeting that it will limit its February and March crude production to 8.119 million b/d, well below its quota of 9.119 million b/d.

The Democrats have also effectively seized control of the US Senate, and with the party also controlling the White House and the US House of Representatives, there are hopes that additional stimulus measures will be passed. This has provided a boost to oil prices, as additional stimulus may hasten the US economic recovery and boost energy demand.

“The bullish sentiment that had spread following the Democrats’ win at the US Georgia runoff elections had continued for a second day,” Pan Jingyi, senior market strategist at IG, said in a Jan. 8 note.

Market concerns over the progress of the coronavirus pandemic, however, have capped gains in oil prices.

On Jan. 7, Japan’s Prime Minister Yoshihide Suga declared a state of emergency for Tokyo and three adjacent prefectures to curb the rapidly spreading virus, while on the same day, China reported its biggest rise in daily COVID-19 cases since July, according to media reports.

In Europe and North America, countries continued to struggle to contain the pandemic, with Quebec becoming the first province in Canada to implement a curfew on Jan. 7, these media reports showed.