Oil prices rose early on Tuesday amid signs that the physical supply of crude will tighten over the first quarter and counter concerns about slow vaccine rollouts and Chinese lockdowns.
As of 10:14 a.m. ET on Tuesday, WTI Crude prices were trading up 0.23 percent at $52.90, and Brent Crude was up 0.30 percent at $56.13.
Oil prices largely shrugged reports of an explosion in Riyadh, the capital of the world’s top oil exporter, Saudi Arabia. The cause for the blast, which occurred around 1 p.m. local time, or 10 a.m. GMT, was not immediately known.
Lower oil exports from Russia and Iraq next month, as well as the Saudi extra cut of 1 million bpd for February and March is giving market participants hope that the physical market is tightening at a time when the immediate prospects for global oil demand are not bullish.
According to Bloomberg, the seaborne crude oil exports of Russia’s flagship Urals grade are set to decline by nearly 20 percent next month compared to this month.
Moreover, Iraq, OPEC’s second-largest producer after Saudi Arabia, has pledged to pump less oil this month and next to make up for excess production last year.
For both January and February, Iraq plans average daily output of 3.6 million barrels, Ali Nizar, the deputy chief of SOMO, the oil marketing company of Baghdad, told Bloomberg in an interview. This would compare with 3.85 million bpd for December.
Iraq’s crude oil exports will also fall, to some 3 million bpd from 3.3 million bpd for December, as long as the Kurdistan Regional Government agrees to cut its oil output as well, Nizar said.
“A flare-up in virus cases in China is threatening fuel demand during the upcoming Lunar New Year period while the market also fret a potential delay of the US stimulus package,” Saxo Bank said early on Tuesday.
“The physical market meanwhile continues to tighten supported by lower February shipments from Iraq and Russia on top of the planned cuts from Saudi Arabia. As a result, the front month Brent spread is signaling the tightest market conditions in a year,” Saxo Bank’s strategy team noted.
By Tsvetana Paraskova for Oilprice.com
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