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  • Crude oil markets have been choppy on Monday, buffeted by swings in broader macro sentiment.
  • WTI has slipped from European morning highs in the $47.40s back to the mid-$46.00s since the start of the US session.

Prior to the start of the US session, front-month WTI crude oil futures hit highs of the day just below $47.50. However, the crude oil complex sold off sharply following the NYMEX pit opening (at 14:00GMT), briefly even slipping below the $46.00 level, before recovering back to current levels around the $46.50 mark, about a dollar below earlier highs but still marginally higher on the day.

Crude oil markets buffeted by swings in sentiment

Crude oil markets initially started the day on the front foot in line with broader risk appetite, boosted by vaccine hopes after the FDA approved the Pfizer vaccine and Brexit hopes after talks were extended.

However, news that London would be going back to Tier 3 lockdown amid the spread of a new, more virulent Covid-19 strain and threats from the NYC mayor to send the city back into full lockdown seemed to weigh on the complex. News earlier during the European morning that major Eurozone economies Germany and the Netherlands will both tightening economic restrictions into January has also likely not helped. Meanwhile, the OPEC monthly oil market report revised lower its forecast for demand growth in 2021 by 350K barrels per day, further adding to the downbeat turn in sentiment.

Elsewhere, a few localised supply disruptions were reported over the weekend, with an explosion hitting a ship outside the Saudi Arabian port of Jeddah and a landslide damaging a pipeline carrying crude oil to Iran’s second-largest refinery. This news has not given crude oil a lasting lift, perhaps due to reports from the Iranian oil ministry that it is planning to increase production by almost 70% to 4.5mln bpd next year if the incoming Biden Administration lifts the country’s export ban.

Meanwhile, the OPEC+ Joint Ministerial Monitoring Committee (who monitors cartel member’s compliance), originally scheduled for later this week, has been postponed until January for undisclosed reasons. As a reminder, the cartel agreed at the start of the month to begin gradually easing output cuts from January.

Looking ahead, Private inventory data on Tuesday and then official inventory data on Wednesday will be closely scrutinised, as will the monthly oil market reports from both the International Energy Agency (IEA), which will be released at 09:00GMT on Tuesday. Crude oil markets are likely to otherwise mirror swings in broad macro risk appetite.