UPDATE 6-Oil prices ease as pandemic overshadows Chinese and U.S. data

UPDATE 6-Oil prices ease as pandemic overshadows Chinese and U.S. data

Reuters  | Jan 14, 2021 18:48

UPDATE 6-Oil prices ease as pandemic overshadows Chinese and U.S. data

* Oil market pauses after hitting 11-month high earlier this
* China reports most new COVID-19 cases in more than 10
* Oil market outlook clouded by vaccine rollout variables
* China's crude imports hit record on stockpiling, new
* U.S. crude stockpiles drop, fuel inventories build -EIA

(Updates prices, bullets)
By Devika Krishna Kumar
NEW YORK, Jan 14 (Reuters) - Oil prices dipped on Thursday
as surging coronavirus cases in Europe and new lockdowns in
China renewed worries about global oil demand and eclipsed
bullish signals from Chinese import data and U.S. crude oil
stocks draws.
Brent crude oil futures LCOc1 fell 28 cents, or 0.5%, to
$55.78 a barrel by 12:20 p.m. ET (1720 GMT,) while U.S. West
Texas Intermediate (WTI) CLc1 dropped 1 cent to $52.90.
China, the world's second-largest oil consumer, reported its
biggest daily jump in new COVID-19 cases in more than 10
Governments across Europe have announced tighter and longer
coronavirus lockdowns, with vaccinations not expected to have a
significant impact for the next few months.
"The complex remains in pause mode, a development that
should not be surprising given the magnitude of the oil price
gains that have been developing for some 2-1/2 months," Jim
Ritterbusch, president of Ritterbusch and Associates, said.
Global benchmark Brent hit an 11-month high just below $57
on Tuesday, bolstered by Saudi Arabia's plans to limit supply.
"Global oil demand improvement during the next few months
may well be intersecting with reduced production as the Saudis
initiate their voluntary cuts at a time when U.S. shale
producers are showing reluctance in boosting output in response
to higher prices."
The Organization of the Petroleum Exporting Countries left
its forecast for world demand unchanged, saying oil use will
rise by 5.9 million barrels per day this year to 95.91 million
bpd, following a record 9.75 million bpd contraction last year
due to the pandemic. Oil producers face an unprecedented challenge balancing
supply and demand as factors including the pace and response to
COVID-19 vaccines cloud the outlook, said an official at the
International Energy Agency (IEA). Saudi Arabia, for example, is throttling oil supply to some
Asian buyers, refinery and trade sources told Reuters, while
Russia plans to ramp up output this year, according to Russian
media. "The Saudi cuts are priced in since last week, even a bit
more than was reasonable under market conditions, and a
rationalisation of prices was overdue," said Rystad oil market
analyst Bjornar Tonhaugen.
"Seeing COVID-19 infections rise in China by the largest
margins in a long time is alarming for the market and, combined
with strict ongoing lockdowns in Europe, may affect oil demand
much more than initially anticipated in the first quarter."
Brent's six-month backwardation, whereby contracts for later
delivery are cheaper, fell to its lowest since Jan. 5,
indicating bullish sentiment easing.
Despite the coronavirus shock, China's total crude oil
imports rose 7.3% in 2020, with record arrivals in the second
and third quarters as refineries expanded operations and low
prices encouraged stockpiling, customs data showed. giving a floor to prices, U.S. crude oil stockpiles
last week fell more than expected, though gasoline and
distillate inventories rose as refiners ramped up output,
government data showed on Wednesday. EIA/S
Raising hopes of increased oil demand was a hefty U.S.
COVID-19 relief package, which President-elect Joe Biden is due
to unveil on Thursday.

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