Oil prices traded flat this evening, supported by a draw in US crude inventories and Britain's approval of a second coronavirus vaccine but pressured by swelling year-over-year supply and the view that a federal aid package would be slimmer than hoped.
Brent crude futures gained nine cents to $51.18 a barrel this evening, off the session high of $51.56 and well lower than the $66 price that started the year.
US West Texas Intermediate (WTI) crude fell four cents to trade at $47.96, substantially down from about $62 at the start of 2020.
Both contracts slipped early in the session as a bigger fiscal aid package in the US looked increasingly unlikely, dampening hopes for a swifter recovery of oil demand that has been hammered by the Covid-19 pandemic.
Prices rallied after an Energy Information Administration report showed crude inventories fell by 6.1 million barrels in the latest week to 493.5 million barrels.
But traders noted that US crude inventories still were ending the year more than 10% higher than the last week of 2019.
"We couldn't even pull down storage levels with a 6.1 million inventory draw which is sad but a reality, and it took the wind out of the sails for a big rally" said Bob Yawger, director of energy futures at Mizuho.
On the supply front, a January 4 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, is set to boost output by 500,000 barrels per day (bpd) in January.
Oil prices found some support today from the US dollar hitting its lowest against a basket of currencies since 2018, making oil cheaper for holders of other currencies.
Raising hopes of a faster normalization of travel and work, Britain today became the first country to approve a coronavirus vaccine developed by the University of Oxford and AstraZeneca.
But vaccine rollout in the US has rolled out slower than previously expected. Some 2 million people have been vaccinated, President-elect Joe Biden said this week, well short of the 20 million Trump had promised by the end of the year.