Oil Prices Edge Downward

(Bloomberg) -- Oil futures edged lower after China reported new virus cases and the dollar rose, while physical crude prices in Asia weakened.

Futures in New York fell 0.5%. Premiums for Russia’s ESPO crude, a favorite of refiners in Asia, have fallen by more than $1 since last month, according to traders who asked not to be identified. A flurry of new Covid cases in China and flare-ups in other major regional consumers like Japan are menacing demand. Gaps in access to vaccines raise concern that the continued spread of the virus will breed more dangerous versions.

But while a second daily rise in the dollar helped force oil lower on Monday, other data prevent a steeper decline. Chinese refiners processed record volumes of crude in December -- about 14 million barrels a day -- in a sign of just how strongly consumption in the world’s largest crude importer had rebounded late last year. OPEC+ output cuts and the rollout of Covid vaccines helped push prices to a 10-month high at the start of 2021.

“The virus will be beaten, and the foundation of economic recovery was laid down in the second half of last year,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. As a result, the pullback in prices “might prove to be short-lived,” he said.

Prices

• West Texas Intermediate for February delivery dropped 0.5% to $52.09 a barrel as of 2 p.m. in New York, after trading had halted without a settlement due to the Martin Luther King, Jr. day holiday
• Brent for March declined 0.6% to $54.75

Libya’s oil output, meanwhile, has dropped by about 200,000 barrels a day because of a leaking pipeline. The decline underscores how difficult it is for the country to maintain production after almost a decade of civil war.

Volumes of crude stored at sea are also continuing to fall as the market rebalances. Floating storage slipped to 80 million barrels last week, according to Vortexa Ltd, the lowest since April.

Other oil-market news

• The cold snap that’s pushed liquefied natural gas prices to record highs is also roiling LPG, leading to shortages of the gas that’s used for heating and cooking as well as being a feedstock for petrochemical plants.
• Indian energy demand got off to a shaky start in the new year with sales of transport and cooking fuels over the first two weeks of 2021 declining from a month earlier.
• President-elect Joe Biden may fulfill a pledge to cancel the Keystone XL pipeline permit via executive action on his first day in office, CBC News reported.
• Iraq sold oil at a slower pace in the first half of January than the December average even as the OPEC+ group eased production curbs at the start of the year.

--With assistance from Aaron Clark.

© 2021 Bloomberg L.P.