Oil Dips as Traders Anticipate More Near-Term Lockdowns

Analysts are also concerned about OPEC ramping up output next month: File Image/Pixabay

Despite the massive Covid vaccine rollout that will end the pandemic sometime in 2021 (with the U.K. possibly returning to normal life by the end of February), crude traders on Monday were worried about further lockdowns in the interim, and as a result prices dipped moderately.

Brent settled down 43 cents at $50.86 per barrel, while West Texas Intermediate settled 61 cents at $47.62 per barrel.

John Kilduff, founding partner at Again Capital, remarked,  "We continue to focus on this pandemic and what January is going to bring; the prospects of more lockdowns are looming and I think that is what's holding things back."

Also impacting prices was concern over the Organization of the Petroleum Exporting Countries (OPEC) potentially boosting output by 500,000 barrels per day (bpd) next month and Russia supporting another increase of the same amount in February; all concerned parties will discuss the issue during a January 4 meeting.

Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors, said, "OPEC+ can't wait, particularly Russia and even Iraq, to pump more barrels.

"They want things to go back to normal, so there's more risk to downside than upside."

Russia is also pushing ahead with plans to use the Northern Sea Route to ship oil and products: Rosneft announced on Monday that it had bought the rights to a huge oilfield in the Taymyr peninsula in the Arctic.

Meanwhile, China continues to flex its economic muscles: according to the blog of a state-run energy exchange, it has issued its first batch of 2021 quotas for exports of refined fuel totalling 29.5 million tonnes to seven firms, a volume that is 5.4 percent higher than the first issue of 2020.

The recipients are CNPC, Sinopec, CNOOC, Sinochem, China National Aviation Oil Company, defence conglomerate Norinco, and private refiner Zhejiang Petrochemical Corp.