Oil edged lower toward $52 a barrel as a resurgent Covid-19 outbreak in some regions and a slow roll-out of vaccinations weighed on the demand outlook, offsetting tightening global supply. Futures in New York fell 0.6% after rising around 1% on Monday. 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. Asian equities, meanwhile, slid as investors mulled the possibility of a U.S. stimulus package being delayed.
Seaborne exports of Russia’s flagship Urals crude will drop by almost 20% in February from a month earlier, adding to lower Iraqi production and crimped Libyan shipments. Prompt time spreads for the U.S. 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 on Monday.
“Oil investors are still struggling to gauge the impact of mobility restrictions on Chinese consumption ahead of the holidays,” said Stephen Innes, chief market strategist at Axi. “Tightening supply is definitely welcomed and is a timely relief as demand was shifting lower on weaker consumption in Europe.”
PRICES
West Texas Intermediate for March delivery slipped 29 cents to $52.48 a barrel on the New York Mercantile Exchange at 7:40 a.m. London time after rising 50 cents on Monday.
Brent for March settlement slid 0.5% to $55.60 on the ICE Futures Europe exchange after adding 0.9% in the previous session.
