Oil futures held steady, despite a stronger dollar and physical prices in Asia continuing to trade at weaker levels than a month ago.
Premiums for Russia’s ESPO have fallen by more than $1 since last month, according to traders who asked not to be identified. It follows a flurry of new COVID cases in China, potentially menacing demand, and flare ups in other regional oil consumers like Japan. Indian energy demand was also off to a shaky start to the year, with sales of transport and cooking fuels dropping from a month earlier.
While a second consecutive daily rise in the dollar was adding pressure to prices on Monday, not all data was so downbeat. Chinese refiners processed a record volume of crude in December, the equivalent of about 14 million barrels a day, a sign of just how strongly consumption in the world’s largest crude importer had rebounded into the end of last year. Combined with OPEC+ output cuts and the rollout of COVID vaccines, that had helped push prices to a 10-month high at the start of the year.
“The virus will be beaten, and the foundation of economic recovery was laid down in the second half of last year,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. As a result, the pullback in prices “might prove to be short-lived,” he said.
- West Texas Intermediate for February delivery dropped 0.2 per cent to $52.25 a barrel on as of 10:43 a.m. in London
- Brent for March settlement declined 0.4 per cent to $54.90
Libya’s oil output, meanwhile, has dropped by about 200,000 barrels a day after the closure of a leaking pipeline. The decline underscores how difficult it is for the country to maintain production after almost a decade of civil war.
Volumes of crude stored at sea are also continuing to fall as the market rebalances. Floating storage slipped to 80 million barrels last week, according to Vortexa Ltd, the lowest since April.
© 2021 Bloomberg L.P.