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Oil in New York inched higher as the dollar weakened, with investors assessing the impact of supply curbs from Iraq and Libya on the near-term demand outlook.
Futures rose 0.6% toward $53 a barrel as a weaker dollar increased the appeal of commodities like oil that are priced in the currency. Iraq pledged to cut output in January and February after pumping more than its OPEC+ quota last year, and Libyan guards halted some crude exports after a pay dispute.
The global supply picture is mixed, however. U.S. crude inventories expanded by 4.35 million barrels in the week ended Jan. 15, a surprise gain and the first since early December, according to government data released on Friday. Most analysts surveyed by Bloomberg had predicted a draw.
Oil’s rally has stalled over the past week and a half as a resurgence of the virus in China spurred localized lockdowns, while restrictions remained in place in many European countries. Iraq, meanwhile, will pump 3.6 million barrels a day in January and February, the lowest level since early 2015.
“After Friday’s high volatility and lower close, it’s going to be a cautious start to the week,” said Vandana Hari, founder of Vanda Insights in Singapore. “Unless speculators spot a bargain and swoop in, crude may remain range-bound with a downside bias.”
Brent’s prompt timespread was 18 cents a barrel in backwardation — a bullish market structure where near-dated contracts are more expensive than later-dates ones — compared with a 7-cent contango at the start of the month.
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The world economy is facing a tougher start to 2021 than expected as Covid-19 infections surge and as it takes time to roll out of vaccinations. Global growth is still on course to rebound quickly from the recession of last year, but it may take longer to ignite and not be as healthy as previously forecast. The World Bank trimmed its prediction to 4% in 2021 and the International Monetary Fund will this week update its own outlook.
