Oil Poised for Longest Run of Gains in 2 Years

Andrew Cummings
January 13, 2021

Brent crude oil prices fell as much as $1 per barrel on Monday, hit by renewed concerns about global fuel demand amid tough coronavirus lockdowns around the world, as well as a stronger USA dollar.

West Texas Intermediate for February delivery gained 0.7% to $53.60 a barrel on the New York Mercantile Exchange at 7:50 a.m. London time after rising about 12% over the past six days.

US West Texas Intermediate (WTI) crude fell one per cent to reach $51.72 a barrel, after rising to its highest rates in almost a year on Friday.

Saudi Arabia plans to cut output by an extra 1 million barrels per day (bpd) in February and March to keep inventories in check.

Last year, the company cut June-August shipments to Asian term buyers to comply with the OPEC+ agreement.

But OPEC+ compliance with pledged oil output curbs fell to 75% in December, among the lowest levels since the supply pact started in May 2020, tanker tracker Petro-Logistics said on Tuesday, which could weigh on oil prices. The energy benchmark also benefited from the upbeat sentiment and US dollar weakness ahead of the official inventory data from the US Energy Information Administration (EIA).

Many producers will be able to boost output and US shale will be needed to fill the gap in the oil balance in the short term, IEA Director Fatih Birol said during a Bloomberg television interview.

Saudi Arabia exported about 7 million barrels per day of crude, of which around 70% landed in Asia past year, data on Refinitiv Eikon showed.

While the sustained increase in oil price means a potential boost to Nigeria's crude oil export revenue, it will further push up the landing costs of petroleum products being imported into the country.

President-elect Joe Biden, who takes office on January 20, has promised "trillions" in extra pandemic-relief spending.

The pandemic claimed its highest US death toll yet this week, killing more than 4,000 people in a single day, while China reported the biggest rise in daily cases in more than five months and Japan may extend a state of emergency beyond the greater Tokyo region.

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