Oil rally stalls below $53 after cold weather surge, Saudi cuts

Oil dipped, after frigid temperatures and Saudi Arabia’s promised output cuts helped push prices to a 10-month high.

Futures traded below $53 a barrel in New York, having snapped a six-day gain on Wednesday. There are signs that physical markets are softening in Asia, with Abu Dhabi’s Murban crude at a discount to its benchmark despite continued OPEC+ cuts and the Saudi plan to slash output next month. Technical indicators suggest oil is likely headed for a decline with the global Brent benchmark on its longest run of overbought days since 2012.

Crude’s advance this year has seen Wall Street turn steadily more bullish on the market. Goldman Sachs Group Inc. and JPMorgan Chase & Co. have both raised price forecasts in recent days, saying market tightness that had been expected at year-end should come in the summer. Plunging temperatures, meanwhile, have bolstered energy consumption, with Asian utilities snapping up prompt supplies of fuel oil as power use surges, offsetting coronavirus concerns.

“Prices are currently driven by expectations and not by immediate realities,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. “Demand worries are outweighed by supply management.”

Demand anxiety persists, with signs that parts of Europe are straining under the pressure of renewed virus lockdowns. Road use in the U.K. was down 42 per cent last week compared with normal levels.

In Asia, China’s economic recovery gathered pace in December as exports jumped, pushing the trade surplus to a record high. Oil imports, however, fell about 15 per cent compared with November.

© 2021 Bloomberg L.P.

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.