Mumbai Commodities Control - Oil prices edged higher on Monday after a weak start, holding on to the past three months of gains, although patchy coronavirus vaccine rollouts, new infections and the discovery of new variants are keeping a lid on prices.
The oil futures are trading higher during early Asian trading hours extending previous session gains. Brent crude futures were up 10 cents at $55.14 a barrel by 0233 GMT, while U.S. West Texas Intermediate (WTI) gained 1 cent to $52.21. Both benchmarks gained nearly 8% in January.
Oil prices have been boosted by vaccination programmes getting underway in hard-hit countries and output cuts by major producers like Saudi Arabia. But euphoria over a possible end to the pandemic has been undermined by the slow pace of vaccinations and the rise of new variants of the coronavirus.
OPEC and its allies estimated they implemented 99% of their agreed oil-supply curbs in January. The 23-nation alliance aimed to withhold 7.2 million barrels a day of crude from the market last month.
They agreed to increase production by 500,000 barrels from December as part of a plan to ease the cuts. Iraq, the biggest producer in OPEC+ after Saudi Arabia and Russia, said it would reduce its daily output to 3.6 million barrels in January and February to make up for breaching its quota last year. That would be a reduction of roughly 250,000 barrels a day from December.
"Demand will recover across the board, led by Asia-Pacific and North America," FitchSolutions said in a research note. "Europe and Latin America will lag, largely a reflection of softer economic recovery in key markets in these regions," it said.
U.S. oil and gas drillers are gearing up for a pickup in demand and as higher prices make news wells profitable again, adding rigs for a sixth month in a row in January. U.S. output is rising and was above 11 million barrels per day in November for the first time since April, according to the Energy Information Administration.
The positive trend is expected to remain intact in the domestic futures market, as well, during the day. Thus, intraday traders are advised to initiate buy positions.
We Recommend:
Crude oil MCX Feb: Buy at 3800-3810 TP 3860 SL 3770
Natural Gas MCX Feb: Buy at 200-201 TP 205 SL 187
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