Oil held gains near $53 a barrel as more signs of tightening supply offset concerns that a resurgent Covid-19 outbreak in some regions and a slow roll-out of vaccinations will blunt near-term demand.
Futures in New York were steady after rising 1% on Monday. Russian seaborne exports of its flagship Urals crude will drop by almost 20% in February from a month earlier, adding to lower Iraqi output and crimped Libyan shipments. Key prompt timespreads for the U.S. benchmark and global Brent are in a bullish market structure and widening, indicating shrinking supplies.
The market, however, still faces headwinds from the virus. A flare-up in China is threatening fuel demand during the Lunar New Year period, with the government encouraging millions not to travel to prevent further spread.
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.
Brent’s prompt timespread was 20 cents a barrel in backwardation on Monday — where near-dated contracts are more expensive than later-date ones — compared with a 7-cent contango at the start of the month.