0318 GMT GMT: Crude oil futures were lower during mid-morning Asian trade Jan. 26, as pandemic-related concerns in the region negated any market upside anticipated from the curtailment of supply.
At 11:18 am Singapore time (0318 GMT), the ICE Brent March contract was down 31 cents/b (0.55%) from the Jan. 25 settle to $55.57/b, while the March NYMEX light sweet crude contract was down 24 cents/b (0.45%) to $52.53/b. The March contract for Brent had settled 0.85% higher at $55.88/b, whereas the March contract for NYMEX light sweet crude had jumped 0.96% to $52.77/b.
Demand-side concerns remained etched in the market, as countries in Asia Pacific continue to battle the pandemic, while countries in Europe mulled tighter restrictions to curb the spread of mutant strains.
The fall in crude prices comes despite expectations of curtailed market supply.
Iraq is slashing oil production to compensate for excess production over its OPEC+ output quota. It will pump 3.6 million b/d this month and next month, the lowest since 2015 and down from 3.85 million b/d in December.
Analysts welcomed the move, as not only will it help balance the supply-demand equation in the coronavirus-ridden markets, but it will also inspire confidence in the OPEC+ alliance’s ability to maintain cohesion and intervene decisively in the markets.
“Presenting a unified OPEC front to combat the negative demand effect of COVID-19 lockdowns is a most welcome deliverable at this stage of the oil markets recovery,” Stephen Innes, chief global market strategist at Axi, said in a Jan. 26 note.
Furthermore, crude exports from Libya may also dwindle in the coming days after the Petroleum Facilities Guard militia group started a strike at the Ras Lanuf, Marsa el-Hariga and Es Sider terminals over a salary dispute. S&P Global Platts reported earlier.
These developments are happening against the backdrop of the 1 million b/d output cut by Saudi Arabia slated to begin in February.
Meanwhile, analysts surveyed by S&P Global Platts were bullish in their forecast for the US commercial crude drawdown in the week ended Jan. 12, as they expected inventories to fall by 1.7 million barrels to around 484.9 million barrels.
Comprehensive data on weekly inventory reports by the American Petroleum Institute and the US Energy Information Administration will be released on Jan. 26 and Jan. 27, respectively.