But OPEC thinks demand will recover slower than predicted in 2021: File Image/Pixabay
The notion that global crude demand would rebound slower than originally expected caused oil prices on Monday to initially drop more than 1 percent - but the historic commencement of the Covid vaccinations in the U.S. enabled two benchmarks to achieve modest gains.
Brent ended the session 32 cents higher at $50.29 per barrel, while West Texas Intermediate settled up 42 cents at $46.99 per barrel.
Oil was also supported by news that an explosive-laden boat struck a fuel tanker at the port of Jeddah in Saudi Arabia on Monday; while the damage was limited, the event raised questions about the region's stability.
Bjarne Schieldrop. chief commodity analyst, SEB
We think that this rally has further to go
Jim Ritterbusch, president of Ritterbusch and Associates, noted the psychological impact of the Covid inoculations that began Monday by stating, "Price momentum has slowed appreciably during the past couple of weeks and while some fresh or unexpected bullish headlines may be required to advance the complex into new high territory, we will also note a market that appears to have developed immunity to bearish headlines that would normally be slapping the complex down."
Such was the case as traders shrugged off the Organization of the Petroleum Exporting Countries' (OPEC) concern that oil demand would rebound more slowly in 2021 than previously thought because of a perceived lingering impact of the pandemic.
The cartel predicted that demand will rise by 5.90 million barrels per day (bpd) next year to 95.89 million bpd, 350,000 bpd less than expected a month ago.
Also largely ignored by traders was a National Oil Corporation source telling media that oil production in Libya stood at 1.28 million bpd on Monday, up from 1.25 million bpd in late November.
Bjarne Schieldrop. chief commodity analyst at SEB, struck a distinct note of optimism on Monday by stating, "Brent crude is supported by both financial and physical flows, the dollar is declining, the Brent crude curve is in backwardation, and vaccines are being rolled out.
"We think that this rally has further to go."
For his part, John Kemp, commodities analyst at Reuters, observed that Brent prices "are now climbing into the critical area of $55 +/- $5 where Saudi Arabia and Russia disagreed earlier this year about the desirability of continuing to restrain production."
While he forecast an early and sustained increase in oil consumption coupled with continued producer restraint next year, he added that the distribution of risks has shifted and there is "more scope for disappointment than before."