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Oil fell from its strongest close in nine months, hampered by weaker risk sentiment in global markets.
Crude futures were down 0.9% in New York, with the dollar rising and European equities and U.S. stock futures declining. Oil rallied last week after OPEC and its allies agreed to implement only about a quarter of their planned output hike in January.
The market is showing signs of recovery. Saudi Arabia raised oil pricing for Asia, a signal the kingdom is confident demand is strong enough to absorb next month’s small supply boost. China’s economy appears robust, with exports rising the most since early 2018 last month.
Crude’s outlook is now heavily dependent on how quickly COVID-19 vaccines can be rolled out, with indications most Americans will be able to get one by the second quarter of next year. OPEC+ is facing more potential supply challenges, however, as Libya continues to ramp up production. Iran is also preparing to raise exports in a sign the country expects the U.S. to ease some sanctions under a Joe Biden presidency.
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“The oil market will see better days in 2021, it’s almost certain, but it still has to overcome a short-term hurdle for a couple of months until demand picks up, and this will constrain prices for the time being,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy AS.
Asia’s demand recovery is rippling around the world. Rising buying interest from the region has pushed up physical prices for North Sea oil, with Forties crude climbing to the highest level since late August.
Higher consumption is also draining oil stockpiled on ships at sea, with floating storage globally falling below 100 million barrels for the first time since April last week, according to data from Vortexa Ltd.
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