Oil prices end 2020 on a positive note, but suffer 20% annual fall as pandemic took toll on demand
Oil futures ended 2020 on a positive note, but suffered a hefty yearly fall, only partially recovering from the hit to crude demand from the COVID-19 pandemic.
West Texas Intermediate crude for February delivery
CL.1,
rose 12 cents, or 0.3%, to end at $48.52 a barrel on the New York Mercantile Exchange early Thursday. March Brent crude
BRNH21,
the global benchmark, rose 17 cents, or 0.3%, to close at $51.80 a barrel on ICE Futures Europe.
For the year, however, WTI, the U.S. benchmark, fell 20.5% in 2020, its second annual fall in three years, according to Dow Jones Market Data. Still, the U.S. benchmark staged a significant rebound from an unprecedented fall that saw an oil futures contract trade — and close — in negative territory for the first time ever in April.
Brent crude fell 21.5% for the year, its largest annual drop since 2015.
Market bulls, however, had momentum on their side to end the year. WTI saw a 7% rise in December, contributing to a gain of more than 20% for the fourth quarter. Brent crude rose 8.9% in December and 26.5% in the final quarter of the year.
“With the current level of global lockdowns appearing to be little more than a speed bump for oil markets, traders look set to ride the vaccine wave of economic optimism into 2021,” said Stephen Innes, chief global markets strategist at Axi, in a note.
See: Why oil prices aren’t expected to see a quick recovery from a more than 20% loss in 2020
Crude oil’s spring plunge came as the COVID-19 pandemic plunged the global economy into recession and as Saudi Arabia and Russia engaged in a monthlong price war that flooded the world with unneeded oil.
The eventual rebound came when demand saw a partial rebound as economies recovered to varying degrees and, moreover, as the Organization of the Petroleum Exporting Countries and its allies — a group known as OPEC+ — instituted production curbs.
Still, “all is not roses” for crude heading into the new year, said Robert Yawger, director of energy futures at Mizuho Securities, in a note.
OPEC+ meets Monday and is likely to further relax its output curbs, adding another 500,000 barrels a day to global supply. That’s on top of an earlier relaxation that will see 500,000 barrels a day hit the market beginning Friday. And the group is scheduled to add another 1 million barrels a day over the course of March and April. U.S. production has also been ticking higher, he noted.
“In the short term, I tend to think [WTI] will take out the $50 level, and perhaps trade as high as $55,” Yawger said, in a note. “Longer term, look for supply to swamp out demand, and push prices lower. ”
Crude was buoyed Wednesday by a larger-than-expected drop in U.S. crude inventories, as well as renewed weakness in the U.S. dollar. The ICE U.S. Dollar Index
DXY,
a measure of the U.S. currency against a basket of six major rivals, was up slightly on Thursday, a day after sliding to 2 1/2-year low.
A weaker dollar is typically seen as a positive for commodities priced in the U.S. unit, making them cheaper to buyers using other currencies. Expectations for a lower trend for the dollar have boosted expectations among bulls for further gains for crude and other commodities in 2021.
Read: How a weaker dollar could help fuel a commodities boom in 2021
The EIA on Thursday said 114 billion cubic feet of natural gas was withdrawn from storage last week. Analysts surveyed by S&P Global Platts had expected the report to show a withdrawal of 123-billion cubic feet for the week ended Dec. 25.
February natural-gas futures
NGG21,
rose 4.8% to close at $2.539 per million British thermal units, leaving it with 16% annual gain — its largest since 2016.
January gasoline
RBF21,
fell 0.3% to $1.4084 a gallon, and dropped 17% in 2020. January heating oil fell 0.9% to close at $1.4763 a gallon, leaving it down 27.2% for the year.
