Oil prices edged up on Monday as a weaker dollar offset fresh concerns about the hit to global fuel demand from renewed lockdowns to curb the spike in COVID-19 infections.
Brent crude futures for March rose 32 cents, or 0.6%, to $55.73 a barrel by 0729 GMT, while U.S. West Texas Intermediate crude for March was at $52.62 a barrel, up 35 cents, or 0.7%.
“Petroleum markets have been in a tug of war recently: Downward revisions to the global demand outlook from the IEA and renewed fears of Chinese demand deceleration due to new coronavirus strains have kept a lid on oil prices,” Citi analysts said in a note.
“Yet, production outages from Libya and Kazakhstan along with OPEC+ cuts and a weaker U.S. dollar have supported market sentiment.”
Libya’s Waha oil has resumed production after pipeline repairs while output from Kazakhstan’s giant Tengiz field was disrupted by a power outage on Jan. 17.
China reported an increase in new COVID-19 cases on Monday, casting a pall over demand prospects in the world’s largest energy consumer, the main pillar of strength for global oil consumption.
Last Friday prices came under further pressure after data from the U.S. Energy Information Administration showed U.S. crude inventories surprisingly rose by 4.4 million barrels in the week to Jan. 15, versus expectations for a draw of 1.2 million barrels.
The number of oil and natural gas rigs added by U.S. energy firms rose for a ninth week in a row in the week to Jan. 22, but are still 52% below this time last year, data from Baker Hughes showed.
The rig count is expected to rebound further in the weeks ahead as producers maximise output ahead of spring, according to Stephen Schork, editor of oil market newsletter The Schork Report.
Some support for prices has come in recent weeks from additional production cuts from the world’s top exporter, Saudi Arabia. But investors are watching for a resumption of talks between the United States and Iran on a nuclear accord - which could see Washington lifting sanctions on Tehran’s oil exports, boosting supply.
Iran’s oil minister said on Friday the country’s oil exports have climbed in recent months and its sales of petroleum products to foreign buyers reached record highs despite U.S. sanctions.
On Sunday, Indonesia said its coast guard had seized the Iranian-flagged MT Horse and the Panamanian-flagged MT Freya vessels over suspected illegal fuel transfers off the country’s waters.
Editing by Kenneth Maxwell and Jacqueline Wong