Oil Near $50 on Dollar Weakness and M.E Tension



Oil Near $50 on Dollar Weakness and M.E Tension
Oil rose for a fourth day, aided by a falling dollar and Middle East tensions, before OPEC+ meets to decide whether it can keep lifting output as a surging virus smothers the global energy demand recovery.

(Bloomberg) -- Oil rose for a fourth day - aided by a falling dollar and Middle East tensions -- before OPEC+ meets to decide whether it can keep lifting output as a surging virus smothers the global energy demand recovery.

Futures in New York jumped as much as 2.5% to approach $50 a barrel. A further decline in the dollar is boosting the appeal of commodities that are priced in the currency, while nervousness over the situation in the Middle East may also be playing a part in crude’s ascent. The USS Nimitz aircraft carrier will remain in the waters around the Arabian Sea following recent threats by Iran, U.S. Acting Secretary of Defense Chris Miller said in a statement.

OPEC+ returned 500,000 barrels a day to the market this month and meets on Monday to decide on production levels for February. The outlook for the first half is very mixed and there are still many downside risks to juggle, OPEC Secretary-General Mohammad Barkindo said at a meeting on Sunday.

The U.K. prime minister said tougher lockdown measures will likely be needed in England, while Japan is considering imposing another state of emergency. The oil demand situation is better in China, however, where a frigid winter and power shortages are prompting factories to rush to install diesel generators. A gauge of Chinese manufacturing strength for December missed estimates, while a similar Indian measure increased slightly from the previous month.

The American crude benchmark looks to be breaking out of the range near $48 a barrel where it’s been recently. Prices have been buffeted by a worsening short-term demand outlook along with optimism consumption will improve later in the year when enough people are vaccinated against Covid-19.

“With the dollar factoring in on the gain, it’s not just oil but funds are flowing into commodities across the board” and tensions between the U.S. and Iran are back in the headlines, said Vandana Hari, the founder of Vanda Insights in Singapore. “The OPEC+ decision could go either way -- a rollover of cuts or a 500,000 barrels a day hike -- but the bulls may take the latter in their stride.”

Prices

  • West Texas Intermediate for February delivery rose 2.1% to $49.55 a barrel on the New York Mercantile Exchange at 7:51 a.m. in London
  • Brent for March settlement added 2.3% to $52.99 on the ICE Futures Europe exchange after closing up 0.3% on Thursday

At a meeting on Sunday, several countries including Saudi Arabia sounded cautious about raising output in February, delegates said. Russia has said OPEC+, which slashed output last year, can add another 500,000 barrels a day next month, while Riyadh has publicly kept its views under wraps.

OPEC production rose by 190,000 barrels a day to 25.3 million barrels a day in December, with Libya driving the gain, according to JBC Energy. Angola, Iran, the United Arab Emirates, Venezuela and Algeria also boosted supply. OPEC is forecasting crude oil demand will rise to 95.9 million barrels a day this year from 90 million in 2020.

Oil’s futures curve is reflecting the mixed short- and longer-term outlooks. Brent’s prompt timespread is just 1 cent a barrel in contango, a market structure where near-dated prices are cheaper than later-dated ones, indicating sentiment is fairly evenly poised between optimism and pessimism.

Other oil-market news

  • Chinese oil majors majors may be next in line for delisting in the U.S. after the New York Stock Exchange said last week it would remove the Asian nation’s three biggest telecom companies.
  • Iraq has selected a Chinese company for a multibillion dollar oil-supply deal, as the Arab nation seeks funds to bolster an economy reeling from the Coronavirus-triggered collapse in energy prices.
  • Iranian energy companies have agreed deals worth $1.2 billion to raise the nation’s crude output, state-run National Iranian Oil Co. said.

© 2021 Bloomberg L.P.



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