By Elizabeth Low and Alex Longley

Jan 31, 2021, 4:48 PM – Updated on Feb 1, 2021, 6:49 AM

Word Count: 389

(Bloomberg) —Oil rose, following back-to-back weekly declines, as broader markets rallied.With headline prices largely range-bound over the past couple of weeks, the more significant market moves have been in the structure of the oil futures curve. Brent’s second-month contract is the most expensive versus a month later in more than a year. The formation — known as backwardation — has been growing in recent months and is a sign of market tightness with Saudi Arabia’s unilateral production cuts set to start this month.

Worsening demand and supply discipline canceling each other out

Keeping a lid on price gains, a Chinese purchasing managers’ index for manufacturing missed estimates in January, showing that efforts to rein in Covid-19 are affecting Asia’s largest economy. That compounded concerns that virus-related restrictions will stymie demand in the coming weeks. But with money flowing into commodities as vaccines are rolled out, and with OPEC+ still restraining output, there are hopes that inventories will fall sharply this month.

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“Risk-on is one factor” driving oil prices higher, said UBS Group AG commodity analyst Giovanni Staunovo. “The second is the prospect of inventory declines over the coming weeks as a result of the Saudi production cut.”

Prices
West Texas Intermediate crude for March rose 0.8% to $52.59 a barrel as of 8:38 a.m. in New York Brent for April settlement advanced 1% to $55.61

Goldman Sachs Group Inc. said the rebalancing of the oil market continues to beat its above-consensus expectations, with the supply deficit seen averaging 900,000 barrels a day in the first half, compared with an earlier estimate of 500,000.

There were softer signs in the demand outlook from India, though. January diesel sales fell 5% from a month earlier, and were down 2.3% from the same period last year, according to preliminary data from officials with direct knowledge of the matter.

Other oil-market news:
The chief executive officers of Exxon Mobil Corp. and Chevron Corp. spoke last year about combining the top two U.S. oil companies, Dow Jones reported, citing people familiar with the talks. The amount of crude oil held around the world on tankers that have been stationary for at least seven days rose to 107.9 million barrels as of Jan. 29, Vortexa data showed. Libya will export slightly less oil in February from its Zawiya port than it did in January, according to a loading plan seen by Bloomberg.

Other oil-market news:

The chief executive officers of Exxon Mobil Corp. and Chevron Corp. spoke last year about combining the top two U.S. oil companies, Dow Jones reported, citing people familiar with the talks.
The amount of crude oil held around the world on tankers that have been stationary for at least seven days rose to 107.9 million barrels as of Jan. 29, Vortexa data showed.
Libya will export slightly less oil in February from its Zawiya port than it did in January, according to a loading plan seen by Bloomberg.