Oil pares gains on worries about Coronavirus vaccine rollout

NEW YORK (Reuters) -Oil prices edged up slightly on Friday but traded in a tight range, and briefly dipped on demand worries due to coronavirus variants and slow vaccine rollouts, which offset a bullish sentiment due to a cut in Saudi Arabian oil supply and falling U.S. oil inventories.

FILE PHOTO: Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base

“The vaccine numbers are just not there,” said Bob Yawger, director of energy futures at Mizuho in New York. Additionally, he said a U.S. economic stimulus package may not come quickly enough to support the market.

Earlier, U.S. President Joe Biden urged congress to take swift action on a $1.9 trillion COVID-19 relief proposal.

“There is no time for any delays,” Biden said. “It could take a year longer to return to full employment if we don’t act and don’t act now.”

Global benchmark Brent crude futures for March rose 44 cents, or 0.8%, to $55.97 a barrel by 12:13 EST (16:13 GMT).

The Brent March contract expires on Friday. The more active April contract was up 25 cents, or 0.4%, at $55.35.

U.S. West Texas Intermediate (WTI) crude futures rose 7 cents, or 0.1%, to $52.36.

Both front month Brent and WTI were on track to post a weekly gain of less than 1%.

A Reuters poll showed oil prices are expected to hover around current levels for much of 2021 before a recovery gains traction towards year end.

“Restrictions on the demand side because of lockdowns are countered by a sufficient reduction in supply ... preventing prices from falling or rising to any significant extent,” said Commerzbank analyst Carsten Fritsch.

Saudi Arabia is set to cut output by 1 million barrels per day (bpd) in February and March. Compliance with output curbs by the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, improved in January.

OPEC oil output rose in January, a Reuters survey found, after OPEC+ agreed to an easing of supply curbs.

However, the rise was less than the amount agreed under the deal, with an involuntary drop in Nigerian exports limiting the increase.

A 9.9 million barrel drawdown in U.S. oil inventories last week and forecasts for a small drop in U.S. oil production in February provided price support. [EIA/S]

But Stephen Brennock of broker PVM said the market remains focused on the vaccine rollout:

“Any loss of momentum in vaccination programmes will undermine the strength of the global oil demand recovery.”

Reporting by Jessica Resnick-Ault in New YorkAdditional reporting by Bozorgmehr Sharafedin in London, Roslan Khasawneh in Singapore and Sonali Paul in MelbourneEditing by David Goodman, Louise Heavens and David Gregorio