Crude Oil Market Report: Recovery Hopes Hit with Cold Water

For the week ending 11 December 2020, US commercial crude inventories decreased 3.1m to 500.1m. After last week's dramatic increase of 15.2m, this week's change was in line with expectations. US crude production fell marginally for the week to 11.0 mb/d. Net crude imports fell sharply for the week to 2.797 mb/d from 4.645 mb/d. Exports increased to 2.627 mb/d, up 0.793 mb/d. Total products supplied to the market increased modestly to 19.335 mb/d.

Crude oil prices, which rose most of last week on the back of positive vaccine news, hit a brick wall today, falling over 2.5 percent. Over the weekend, the UK announced that a mutation of the C-19 virus, which was 70 percent more transmissible, was spreading quickly through southeast England. As a result, the UK triggered tier 4 lockdowns in much of the south, closing all non-essential businesses and severely limiting travel. In reaction to this news, much of Europe (and other countries) stopped all flights into and out of the UK. Traces of this new virus have been found in other countries. All of this "negative" C-19 news poured cold water on traders front-running a hoped-for recovery in early 2021. In short, the recent news made clear (at least for the moment) what we have been cautioning our readers for several weeks. Specifically, despite the positive vaccine news, the global economy is most likely in for several very difficult months as countries simultaneously attempt to roll out the vaccine and control the spread of the virus.

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