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Oil Set for Third Weekly Advance as Market Tightens on Outages

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(Bloomberg) Oil was poised for a third weekly gain as demand remained resilient while supplies are frayed across the OPEC+ coalition and beyond.

Futures increased again on Friday to trade near $80 a barrel in New York, bringing this week’s increase to almost 7%. Kazakhstan’s biggest oil producer has altered output at the giant Tengiz field following protests in the country, while Libyan production has also been crimped. The oil market has firmed into a bullish backwardation structure, signaling growing supply tightness.

Oil poised for third weekly gain as market tightens

The OPEC+ alliance this week stuck with a scheduled output boost of 400,000 barrels a day for February, but the group is unlikely to meet that threshold as some members struggle to achieve their targets. Production in Libya has declined amid militia unrest, while Russia also failed to boost volumes last month. Nigeria, beset by disruptions at loading facilities, pumped just 1.35 million barrels a day of crude last month.

“The recent oil-price rally has clearly been supported by the supply side, with production issues in Nigeria, a deep-freeze disrupting oil flows in Canada and northern U.S., and disappointing production numbers from Brazil, Russia, and OPEC,” said Helge Andre Martinsen, senior oil analyst at DNB Bank ASA in Oslo.

  • West Texas Intermediate for February delivery rose 0.9% to $80.21 a barrel on the New York Mercantile Exchange at 8:40 a.m. local time time after climbing 2.1% on Thursday.
    • Prices are up 6.7% this week.
  • Brent for March settlement was almost 1% higher at $82.77 a barrel on the ICE Futures Europe exchange.
  • Backwardation in Brent’s prompt timespread was at 78 cents, compared with 43 cents a week earlier.

The operator of Kazakhstan’s Tengiz field, known as TCO, declined to provide further details on the size of the output adjustment, but it said that production operations were continuing. TCO is a joint venture led by Chevron Corp. that pumps about a third of the OPEC+ nation’s oil.

A deep freeze in Canada and the northern U.S. has also disrupted oil flows this week. That’s coincided with shrinking American crude inventories, which have declined every week since November.

Other oil-market news:
  • Saudi Arabia cut oil prices for buyers in Asia, signaling that extra supplies from OPEC and its partners could loosen the market amid the rapid spread of coronavirus.
  • EOG Resources Inc., one of the biggest U.S. shale oil producers, is ready to ramp up output as soon as this summer if the market demands it.

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