Oil traded near $53 a barrel in New York as concerns over the pandemic’s latest hit to demand were tempered by signs of tighter global supply.
Futures in New York increased 0.5 per cent after rising one per cent on Monday. A flare-up of the coronavirus in China is threatening fuel demand during the Lunar New Year period, with the government encouraging millions not to travel to prevent the outbreak from spreading further.
At the same time, output from some key nations is being pared back.
Seaborne exports of Russia’s flagship Urals crude will drop by almost 20 per cent 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.
Oil has surged almost 50 per cent 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.
“Oil is currently balancing between future hopes, believes and convictions versus a current dire situation,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “It is a balance between current weakness versus projections and hopes for future strength.”
- West Texas Intermediate for March delivery was 25 cents higher at $53.02 a barrel on the New York Mercantile Exchange at 10:10 a.m. London time.
- Brent for March settlement gained 25 cents to $56.13 on the ICE Futures Europe exchange after adding 0.9% in the previous session.
Brent’s prompt timespread was 23 cents a barrel in backwardation -- where near-dated contracts are more expensive than later-dated ones – compared with a seven-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 per cent from 2019, although 15 per cent 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.
© 2021 Bloomberg L.P.