WTI trading around $59.50 after OPEC+ jitters, French lockdown triggers decline

• Crude oil saw a sharp decline in the latter half of US trade amid OPEC+ jitters and French lockdown concerns.
• WTI dropped from just under $61.00 lows under the $59.00 level, before recovering to $59.50.

Crude oil markets saw a sharp decline in the latter half of US trading hours. Front-month WTI crude oil futures contracts dropped from just under $61.00 to at one point below the $59.00 level, before managing to recover to end Wednesday futures trade close to $59.50. That meant WTI lost about $1.0 or about 1.6% on the session.

Driving the day

Market commentators attributed OPEC+ concerns to Wednesday’s sharp decline in crude oil prices in the latter half of US trade. The OPEC+ Joint Ministerial Monitoring Committee (JMMC) met on Wednesday (they always meet in the build-up to an OPEC+ and often provide a policy recommendation to the leaders of the cartel). No such policy recommendation was made and the meeting reportedly ended in a negative tone. Reportedly there some concerns were expressed at the JMMC meeting about compliance and compensation cut plans, with 3M barrels of crude in overproduction still needing to be compensated for by OPEC+ members since May 2020. A senior OPEC+ official did tell newswires that a rollover of the current output cuts would be the best option, however, and most analysts still expect this to be the case.

Elsewhere, France announced a new national lockdown to last at least a month likely - this did little to help crude oil’s fortunes; French President Emmanuel Macron’s announcement, where he made the lockdown official, seemed to coincide with some of the selling pressure. This latest announcement may prompt further downwards revisions to oil demand growth forecasts for 2021.

Finally, as a recap, crude oil markets saw only a very limited reaction to a mixed weekly EIA inventory numbers; in contrast to Tuesday’s API report, headline crude stocks posted a surprise draw of 876K barrels versus expectations for a 107K build. Similar to the API report, Gasoline stocks posted a large draw of over 1.7M barrels. However, Distillate stocks showed a much larger than expected build of over 2.5M barrels, Cushing stocks also saw a build and US crude oil production rose by 0.1M barrels per day to 11.1M.