Oil rose to trade 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 0.4% after rising 1%. 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% in February from a month earlier, coming on top of lower Iraqi production
and a brief disruption in Libyan shipments.
Prompt timespreads for the US benchmark and global Brent are in a bullish market structure and widening, indicating shrinking supplies.
Oil has surged almost 50% 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.
“Oil is currently balancing between future hopes, believes and convictions versus a current dire situation,” said Bjarne Schieldrop, chief commodities analyst at SEB.
West Texas Intermediate for March delivery was 20 cents higher at $52.97 a barrel on the New York Mercantile Exchange at 8:31 am local time.
Brent for March settlement gained 18 cents to $56.06 on the ICE Futures Europe exchange after adding 0.9% in the previous session. Brent’s prompt timespread was 25 cents a barrel in backwardation — where near-dated contracts are more expensive than later-dated ones — compared with a 7-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% from 2019, although 15% higher than last year.