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

Oil prices were steady on Friday, sticking to ranges seen over the past three weeks, as investors looked for signs of changing supply and demand fundamentals. A cut in Saudi Arabia’s oil supply and lower U.S. oil stocks helped offset price pressures from fuel demand, which is slowing due to stalled vaccine rollouts and contagious new coronavirus strains.

“We’re waiting for the next shoe to drop in the oil market. We really don’t have much to move us around,” said Michael McCarthy, chief strategist at CMC Markets. Brent crude futures for March rose 4 cents, or 0.1%, to $55.57 a barrel at 0520 GMT, after falling 0.5% in the previous session. The Brent March contract expires on Friday. The more active April contract rose 13 cents, or 0.2%, to $55.23.

U.S. West Texas Intermediate (WTI) crude futures slipped 7 cents to $52.27 a barrel, after falling 1.0% on Thursday. “Even the currency effects that have been an occasional driver of the market have dried up with the U.S. dollar also very stable at current levels,” said McCarthy. 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. 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 to support the market. However, market gains have been capped by worries about stalled vaccine rollouts and the spread of contagious new variants of the coronavirus.

Oil steady as supply cuts offset demand worries on stalled vaccine rollouts, Reuters, Jan 29