Oil heads for another downturn in 2021 as lockdowns hurt demand

Global crude oil markets have shed around one fifth of their value this year as coronavirus-induced lockdowns hammered much of the world’s economy, but oil prices have rallied from their lows as government rolled out stimulus.

Brent, the benchmark for Nigerian crude grades, dropped 8 cents or 0.2% to $51.55 per barrel at 08:56 West Africa Time on Thursday, the last trading day of 2020. U.S. West Texas Intermediate (WTI) declined by 13 cents or 0.3% to $48.27.

Bonny Light, Nigeria’s banner oil grade, eased by 3 cents or 0.06% to $50.82 on Wednesday.

“It is kind of year-end quiet but a weaker dollar is helping keep a floor under markets,” Stephen Innes, chief global market strategist at Axi, said.

Brent and WTI have risen by over 100% since touching decade-lows in April, putting past a year marking the first negative oil prices for WTI that upset investors around the world.

Asian shares inched up on Thursday and were on course to end turbulent 2020 at historic highs, after lifting investors’ optimism for a global economic rebound impelled the dollar drop further against most major currencies.

The greenback was ending 2020 in a downward trajectory with investors betting a world economic bounce-back will suck money into riskier assets even as the United States has to borrow more to finance its expanding twin deficits.

But global commodity markets are set to end the year on an upbeat note, with improving demand and large-scale stimulus packages boosting prices following a roller coaster ride caused by the coronavirus.

Deployment of vaccines to fight the virus and trillions of dollars’ worth of fiscal backing are anticipated to bolster investment and spending in 2021.

Worries over coronavirus lockdowns are likely to limit rises in oil prices in the short term.

A new coronavirus variant in the U.K. has birthed the re-introduction of curbs on movements, hitting near term oil demand and impacting oil prices, while hospitalisations and infections have soared in parts of Europe and Africa.

On the supply side, U.S. energy companies this week added 3 oil and natural gas rigs to the best quarter for stimulating the rig count since the second quarter of 2017, according to Baker Hughes data.

A 4th January meeting of the Organisation of the Petroleum Exporting Countries (OPEC) and its Russia-led allies, a cartel known as OPEC+, plans to improve supply by half a million barrels per day in January, a move could impact oil prices.