Oil was steady in Asia after jumping the most in three weeks on optimism over the demand outlook and amid a broad market rally.
Futures in New York traded near US$54 ($71.87) a barrel after rising 2.6% on Feb 1. Saudi Aramco said it sees oil demand returning to pre-virus levels later this year. Royal Dutch Shell Plc, meanwhile, raided the North Sea physical market, buying the most cargoes of benchmark grades in a single day in 10 years in the S&P Global Platts pricing window.
Crude was swept along on Monday with US shares, which rallied the most in about 10 weeks as concerns eased that the recent onslaught of speculative buying will derail the bull market in equities.
Oil still faces a challenging short-term demand environment amid concern Covid-19’s new variants will lead to more lockdowns, with a resurgent virus setting back a recovery in Asian transport fuels. However, crude’s market structure keeps strengthening, suggesting that the large stockpiles built up last year are shrinking fast and will continue to do so.
See: Oil retreats to below US$52 on stronger dollar
OPEC may also be adding less supply into the market than expected. While the group raised crude production as planned last month, the monthly change was barely two-thirds of the scheduled amount as increases by OPEC’s Persian Gulf exporters were offset by disruptions in Nigeria and Libya.
Iraq’s crude oil exports, meanwhile, were nearly unchanged in January, meaning the nation may have failed to meet its pledge to cut overall output to the lowest level in six years.
