Tuesday, 02 March, 2021

Oil steadies as US inventory fall tempers demand woes

Oil rises to highest since Feb, set for weekly gain on Saudi output cut Oil rises above $56 as tighter supply offsets coronavirus concern
Ginger Lawrence | 13 January, 2021, 18:49

Most OPEC+ producers will hold production steady in the face of new coronavirus-induced lockdowns.

Front-month WTI crude oil futures contracts trade with mild losses on Monday, though are off $51.50 lows having managed to recover back to the north of the $52.00 level as the USA trading session got underway.

Brent crude climbed 94 cents, or 1.8%, to $55.35 a barrel by 1:25 p.m. EST (1825), its highest since late February, and West Texas Intermediate crude futures (WTI) gained 76 cents, or 1.5%, to $51.59, also its highest since late February. WTI rose to its highest in almost a year on Friday.

"U.S. shale producers' response to the rally in oil represents the most significant near-term supply risk for oil", said Stephen Innes, chief global market strategist at Axi. Despite strict national lockdowns, Britain is facing the worst weeks of the pandemic, and in Germany cases are still rising.

Shijiazhuang, the provincial capital and epicentre of the new outbreak, is in lockdown, with people and vehicles barred from leaving, as authorities seek to rein in the spread.

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In addition, oil traders are riding the price wagon high on the bias that the remainder of the week price action in the U.S dollar index points to more upsides for crude oil prices, on the account that the U.S central bank policy makers are expected to remain dovish and such will keep oil prices supported, as oil is priced in dollars.

"Brent is underperforming after Crown Prince Mohammed bin Salman revealed Saudi Arabia's future beyond oil and Iraq increased their pricing for crude sales to Asia in February", said Edward Moya, a senior market analyst at OANDA.

Still, oil price losses were curbed by plans for US President-elect Joe Biden to announce trillions of dollars in new virus relief bills this week, much to be funded through increased borrowing.

This comes after Saudi Arabia pledged additional voluntary output cuts of 1 million barrels per day (bpd) in February and March under a deal between the Organization of the Petroleum Exporting Countries and its allies including Russian Federation, a group known as OPEC+.