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Oil steady as supply cuts offset demand worries on stalled vaccine rollouts

Published 01/28/2021, 09:40 PM
Updated 01/28/2021, 09:45 PM
© Reuters. A view shows railroad freight car in Omsk

By Sonali Paul

MELBOURNE (Reuters) - Oil prices were mixed on Friday as a pending supply cut by Saudi Arabia and lower U.S. oil stocks helped counter risks of slowing fuel demand due to stalled vaccine rollouts and contagious new coronavirus strains.

U.S. West Texas Intermediate (WTI) crude futures slipped 3 cents to $52.31 a barrel at 0151 GMT, after falling 1.0% on Thursday.

Brent crude futures for March rose 14 cents, or 0.3%, to $55.67 a barrel, after falling 0.5% in the previous session.

The Brent March contract expires on Friday. The more active April contract rose 11 cents, or 0.2%, to $55.21.

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

"The OPEC+ production strategy is still working and hopes are high we will get J&J (NYSE:JNJ)'s vaccine approved sometime next week," OANDA analyst Edward Moya said in a note.

A 9.9 million barrel drawdown in U.S. oil inventories last week and forecasts for a small drop in U.S. oil production in February are also helping support the market. [EIA/S]

However market gains have been capped by worries about stalled vaccine rollouts and the spread of contagious new variants of the coronavirus.

Analysts pointed to news of the South African variant reaching the United States, concerns about a flood of new cases in Israel despite its success in vaccinating its population, and vaccine distribution issues in Europe and the United States as discouraging.

© Reuters. A view shows railroad freight car in Omsk

"Oil investors’ worries ... around vaccines availability and rollouts, which could lead to protracted lockdowns in Europe, are likely the two most damaging feedback loop culprits on the continually revolving carousel of adverse risks for the oil market," said Axi global strategist Stephen Innes.

Latest comments

what's new? vaccine hopes. vaccine hopes. vaccine hopes...LMAO and price rises with number of deaths... LMAO
Oil is going to boost up This article is not correct in my opinion
Reuters will shut down after COVID because they can’t write a single story about anything without having COVID in the first paragraph. Everything in “Reuters’ world” is predicated on the pandemic. Every story is, “... but the pandemic ...”.
Come on. This is a load of rubbish.Not enough supply? Are you high?
If Reuters says it, you can believe every word is written to shape a narrative they want you to believe, so boring
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