Oil climbs with supply curbs and strong equities lifting market

Oil rose, following back-to-back weekly declines, as broader markets rallied.

With headline prices largely range-bound over the past couple of weeks, the more significant market moves have been in the structure of the oil futures curve. Brent’s second-month contract is the most expensive versus a month later in more than a year. That formation – known as backwardation – has been growing in recent months and is a sign of market tightness.

Keeping a lid on price gains, a Chinese purchasing managers’ index for manufacturing missed estimates in January, showing that efforts to rein in COVID-19 are affecting Asia’s largest economy. That compounded concerns that virus-related restrictions will stymie demand in the coming weeks. But with money flowing into commodities to hedge a price recovery as vaccines are rolled out, and with OPEC+ still restraining output, there are hopes that inventories will fall sharply this month.

“Risk-on is one factor” driving oil prices higher, said UBS Group AG commodity analyst Giovanni Staunovo. “The second is the prospect of inventory declines over the coming weeks as a result of the Saudi production cut.”


  • West Texas Intermediate crude for March rose 0.4 per cent to $52.39 a barrel as of 10:52 a.m. London time
  • Brent for April settlement advanced 0.7 per cent to $55.43

Goldman Sachs Group Inc. said the rebalancing of the oil market continues to beat its above-consensus expectations, with the deficit seen averaging 900,000 barrels a day in the first half, compared with an earlier estimate of 500,000.

There were softer signs in the demand outlook from India, though. January diesel sales fell five per cent from a month earlier, and were down 2.3 per cent from the same period last year, according to preliminary data from officials with direct knowledge of the matter.

© 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.