Oil Holds Gain Near $53 as Tightening Supply Offsets Virus Woes

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Jan 26 2021, 5:26 AMJan 26 2021, 7:28 AMJanuary 26 2021, 5:26 AMJanuary 26 2021, 7:28 AM

(Bloomberg) -- Oil traded near $53 a barrel as more signs of tightening supply offset concerns that a resurgent Covid-19 outbreak in some regions and a slow roll-out of vaccinations will blunt near-term demand.

Futures in New York were steady after rising around 1% on Monday. Seaborne exports of Russia’s flagship Urals crude will drop by almost 20% in February from a month earlier, adding to lower Iraqi production and crimped Libyan shipments. Prompt timespreads for the U.S. benchmark and global Brent are in a bullish market structure and widening, indicating shrinking supplies.

The market, however, still faces headwinds from the coronavirus. A flare-up in China is threatening fuel demand during the Lunar New Year period, with the government encouraging millions not to travel to prevent further spread.

Oil has surged almost 50% since the end of October but the rally has started to falter amid concerns about a sustained recovery in global fuel demand. Vaccine coverage won’t reach a point where it will stop the transmission of the virus in the foreseeable future, the World Health Organization said on Monday.

“Tightening supply is definitely welcomed and is a timely relief as demand was shifting lower on weaker consumption in Europe,” said Stephen Innes, chief market strategist at Axi. “Oil investors, however, are still struggling to gauge the impact of mobility restrictions on Chinese consumption ahead of the holidays.”

Prices
West Texas Intermediate for March delivery slipped 7 cents to $52.70 a barrel on the New York Mercantile Exchange at 9:55 a.m. Singapore time after rising 50 cents on Monday. Brent for March settlement slid 0.2% to $55.76 on the ICE Futures Europe exchange after adding 0.9% in the previous session. Crude futures lost 0.2% to 331.3 yuan a barrel on the Shanghai International Energy Exchange after closing little changed on Monday.

Prices

West Texas Intermediate for March delivery slipped 7 cents to $52.70 a barrel on the New York Mercantile Exchange at 9:55 a.m. Singapore time after rising 50 cents on Monday.
Brent for March settlement slid 0.2% to $55.76 on the ICE Futures Europe exchange after adding 0.9% in the previous session.
Crude futures lost 0.2% to 331.3 yuan a barrel on the Shanghai International Energy Exchange after closing little changed on Monday.

Brent’s prompt timespread was 20 cents a barrel in backwardation -- where near-dated contracts are more expensive than later-dated ones -- compared with a 7-cent contango at the start of the month.

About 1.7 billion trips are expected across China over the Lunar New Year period, down 40% from 2019, although 15% higher than last year. The travel rush, which starts on Jan. 28 this year, runs for 40 days and is normally the biggest mass movement of people around the globe as hundred of millions of Chinese jump on planes, trains and automobiles to see their extended families.

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