Oil hits 11-month high after fall in USA crude stocks

Andrew Cummings
February 4, 2021

The contract's "backwardation" structure, where oil for nearby delivery is more expensive than further forward, was near a one-year high at more than $2, indicating expectations of tighter supply.

OIL prices rose around 1 per cent on Tuesday after major crude producers showed they were reining in output roughly in line with their commitments, extending gains for a market thrown out of kilter by weak demand during the coronavirus pandemic.

The ministerial meeting will convene on Wednesday, although it is not expected to recommend any adjustments to oil output policy.

However, fresh data prints coming out of the U.S. may drag on the price of oil as crude inventories are expected to increase 0.367M in the week ending January 29 after unexpectedly contracting 9.91M the week prior, and signs of slowing demand may encourage OPEC to regulate the energy market throughout 2021 as Saudi Arabia remains on track to reduce supply by 1 million b/d until April.

Brent crude futures gained 47 cents, or 0.8%, to $58.93 a barrel, by 0317 GMT, having earlier hit their highest since February 21, 2020 in the wake of the OPEC+ decision.

Crude production by the Organisation of the Petroleum Exporting Countries rose for a seventh month in January but the increase was smaller than expected, a Reuters survey found.

Market analysts say the Opec has been showing more discipline in keeping to its commitments as surging Covid-19 infections threaten any recovery in demand.

Meanwhile, global stocks remained firm on Tuesday, with benchmark US stock indexes moving up as investors have been encouraged by news on the pace of vaccine rollout in the USA and the prospect of more fiscal aid from Congress, which may speed the economic recovery and energy demand.

USA government inventory data is due at 1530 GMT.

Gasoline stocks fell by 240,000 barrels, defying analysts' expectations for a build of 1.1 million barrels.

March natural gas tapped a high above $3 per million British thermal units Tuesday for the first time since November, but has since given up those gains.

On Tuesday, March gasoline tacked on 1.6% to $1.6160 a gallon and March heating oil added 1.7% to $1.6746 a gallon.

Prices saw a more than 11% climb Monday.

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