Economy

Oil set for slow recovery as vaccines rolled out

Oil set for slow recovery as vaccines rolled out”

Past news regarding Saudi Arabia (unilateral oil output cut), the decision of the OPEC+ to refrain from increasing oil production and further USA fiscal stimulus already anticipated by traders collaborated with the upbeat mood surrounding the commodity, particularly in the first half of the new year.

Meanwhile, a hefty drop in US crude stockpiles lent a support to prices.

Brent crude for March delivery decreased 28 cents to close at 55.53 dollars a barrel on the London ICE Futures Exchange. The Brent March contract expires on Friday.

United States crude rose 1.1% to $53.19 a barrel, after opening at $52.62, and hit a low of $52.25, and Brent crude rose 1.3% to $56.26 a barrel, after opening at $55.56, and hit a low of $55.34. The more active April contract was up 25 cents, or 0.4%, at $55.35.

At the moment the barrel of WTI is gaining 1.37% at $53.33 and faces the next hurdle at $53.90 (2021 high Jan.13) seconded by $54.45 (monthly high Feb.20) and finally $59.61 (high Jan.20 2020).

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"Restrictions on the demand side because of lockdowns are countered by a sufficient reduction in supply. preventing prices from falling or rising to any significant extent", said Commerzbank analyst Carsten Fritsch.

According to Commonwealth Bank analyst Vivek Dhar, the Saudi cut effectively means OPEC+ supply cuts will rise from 7.2 million bpd in January to 8.125 million bpd in February.

Saudi Arabia is set to cut output by 1 million barrels per day (bpd) in February and March, and compliance with output curbs by the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, has improved in January.

"The expected rebound in global oil demand depends a great deal on the pace of COVID-19 vaccine distribution", said Stephen Brennock of broker PVM.

The estimated small reduction in the United States oil production in February and the drawdown in the USA oil inventories to 9.9 million barrels last week are also helping to support the fuel market.



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