Oil higher on weaker dollar as supply cuts weighed
OIL in New York inched higher as the dollar weakened, with investors assessing the impact of supply curbs from Iraq and Libya on the near-term demand outlook.
Futures rose 0.6 percent toward $53 a barrel as a weaker dollar increased the appeal of commodities like oil that are priced in the currency. Iraq pledged to cut output in January and February after pumping more than its OPEC+ quota last year, and Libyan guards halted some crude exports after a pay dispute.
The global supply picture is mixed, however. US crude inventories expanded by 4.35 million barrels in the week ended January 15, a surprise gain and the first since early December, according to government data released on Friday. Most analysts surveyed by Bloomberg had predicted a draw. Oil’s rally has stalled over the past week and a half as a resurgence of the virus in China spurred localized lockdowns, while restrictions remained in place in many European countries. Iraq, meanwhile, will pump 3.6 million barrels a day in January and February, the lowest level since early 2015.
“After Friday’s high volatility and lower close, it’s going to be a cautious start to the week,” said Vandana Hari, founder of Vanda Insights in Singapore. “Unless speculators spot a bargain and swoop in, crude may remain range-bound with a downside bias.”
Prices
WEST Texas Intermediate for March delivery rose 31 cents to $52.58 a barrel on the New York Mercantile Exchange at 7:50 a.m. London time after dropping 1.6 percent on Friday.
Brent for March settlement added 0.5 percent to $55.67 on the ICE Futures Europe exchange after falling 1.2 percent in the previous session.
Brent’s prompt timespread was 18 cents a barrel in backwardation—a bullish market structure where neardated contracts are more expensive than later-dates ones—compared with a 7-cent contango at the start of the month. The world economy is facing a tougher start to 2021 than expected as Covid-19 infections surge and as it takes time to roll out of vaccinations. Global growth is still on course to rebound quickly from the recession of last year, but it may take longer to ignite and not be as healthy as previously forecast. The World Bank trimmed its prediction to 4 percent in 2021 and the International Monetary Fund will this week update its own outlook.
Other oil-market news
LIBYA restarted a pipeline that carries crude oil to its biggest export terminal, after a halt that caused the Opec member’s production to drop to the lowest level in two months.
Oil prices are set to rise with Opec production cuts and a demand boost from a rebounding global economy, said Jeremy Weir, the head of commodities trading giant Trafigura Group.