New York Crude futures settled higher Jan. 25 amid tightened supply outlooks and easing COVID-19 restrictions in the US.
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NYMEX March WTI settled 50 cents higher at $52.77/b and ICE March Brent was up 47 cents at $55.88/b.
Oil prices had moved higher overnight amid reports of tightened compliance with OPEC+ production quotas. Iraq is slashing oil production to making up for the 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.
“OPEC remains steadfast in offering support as noted by Iraq’s plan to reduce output to the lowest since 2015 to make up for previous non-compliance,” TD Securities analysts said in a note.
Meanwhile, the recent resurgence in Libya’s crude exports is under threat as the Petroleum Facilities Guard militia group has begun a strike at the Ras Lanuf, Marsa el-Hariga and Es Sider terminals over a salary dispute. Libyan crude and condensate output had surged to around 1.25 million b/d earlier this month, its highest in more than six years.
US commercial inventories are expected to have declined 1.7 million barrels to around 484.9 million barrels last week, according to analysts surveyed by S&P Global Platts Jan. 25. The counter-seasonal draw down would leave stockpiles around 8% above the five-year average of US Energy Information Administration data, in from 9.3% the week prior and marking the narrowest supply overhang since late November.
NYMEX February RBOB settled 1.24 cents higher at $1.5611/gal and February ULSD climbed 1.79 cents to $1.5939/gal.
Against this backdrop the market was also weighing mixed demand signals. In China, a new outbreak of coronavirus in several cities has sparked fears that the country could experience another wave of the pandemic. The local governments have imposed mobility restrictions in the affected cities, including Beijing, and urged citizens to refrain from travel during the upcoming Lunar New Year holiday.
But in the US signs that a post-holiday surge was slowing prompted some states to ease restrictions. California on Jan. 25 lifted a regional stay-at-home order that affected the vast majority of state residents. New York Governor Andrew Cuomo said Jan. 25 said that the state is planning to ease some restrictions amid a slowdown in new cases.
The easing of pandemic restrictions could add a tailwind to already upward trending US gasoline demand, which typically shows a steady climb toward an early March peak, according to EIA data. Apple Mobility data shows that US driving activity was higher for a third straight week last week, climbing nearly 2% from the week prior and up nearly 3% from a late-December nadir.
The front-month ICE New York Harbor RBOB crack versus Brent rallied to $9.57/b in afternoon trading, on pace for the strongest close since mid-July.