Oil prices edged up on Friday but traded in a tight range as demand concerns caused by new coronavirus variants and slow vaccine rollouts offset a cut in Saudi Arabian oil supply and falling US oil inventories.
Brent crude futures for March rose $0.23, or 0.4%, to $55.76 a barrel by 1007 GMT. Brent March contract expires on Friday. The more active April contract was up $0.27, or 0.5%, at $55.37.
US West Texas Intermediate (WTI) crude futures rose $0.07, or 0.1%, to $52.41.
“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 Organisation of the Petroleum Exporting Countries and allies, together known as OPEC+, has improved in January.
A 9.9-million-barrel drawdown in US oil inventories last week and forecasts for a small drop in US oil production in February were also price supportive.
However, market gains have been capped by worries about stalled vaccine rollouts and the spread of contagious new variants of the coronavirus.
Europe’s fight to secure Covid-19 vaccine supplies intensified on Thursday when the European Union warned drug companies such as AstraZeneca that it would use all legal means or even block exports to ensure shots are delivered as promised.
“The expected rebound in global oil demand depends a great deal on the pace of Covid-19 vaccine distribution,” said Stephen Brennock of broker PVM. “Any loss of momentum in vaccination programmes will undermine the strength of global oil demand recovery.”