Oil prices up but remains rangebound as OPEC cuts offset coronavirus fears

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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.

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Brent crude futures for March rose 60 cents, or 1.1 percent, to $56.13 a barrel by 1455 GMT.

The Brent March contract expires on Friday. The more active April contract was up 69 cents, or 1.2 percent, at $55.79.

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US West Texas Intermediate (WTI) crude futures rose 70 cents, or 1.3 percent, to $53.04.

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

“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.

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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+, has improved in January.

OPEC oil output rose in January, a Reuters survey found, after the producer group and allies agreed to an easing of supply curbs.

However, the rise was still 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 US oil inventories last week and forecasts for a small drop in US oil production in February provided price support, but market gains have been capped by concern over 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 programs will undermine the strength of the global oil demand recovery.”