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Oil gains on hopes for improving demand

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Oil gains on hopes for improving demand

Oil prices fell slightly on Monday as a stronger dollar, fears over soaring Covid-19 cases around the world and the slow pace of vaccination against the coronavirus outweighed a better-than-expected quarterly rebound for China's economy.

Brent crude fell 45 cents, or almost 1 per cent, to US$54.65 a barrel by 0207 GMT, after dropping 2.3 per cent on Friday. Front-month February WTI futures expire on Wednesday. China was also the only major economy in the world to avoid a contraction past year as many nations struggled to contain the COVID-19 pandemic.

In China, where new Covid-19 infections have been rising, more than 28 million people are in lockdown as Beijing tries to avoid a resurgence of the coronavirus in the country where it was first discovered.

Most European countries are now under the strictest lockdown since the first coronavirus wave, especially after the United Kingdom identified the new Covid-19 strain.

Meanwhile, referring to a chaotic demand outlook in Asia which had been the only cheery spot for crude oil contracts lately, a partner at Again Capital Management in New York, John Kilduff said, "In terms of being able to talk about demand, Asia was the only bright spot".

Baker Hughes revealed on Friday that the United States drilling and exploration rigs rose 12 rigs last week, the seventh straight weekly increase.

U.S. drillers last week put more oil and natural gas rigs to work for an eighth consecutive week, encouraged by recent price strength that made production more profitable, though the number of operating rigs is still less than half the level of a year ago.

The increase in the USA drilling activity boosted the U.S. production by more than 47% since mid-2016 to a total of 13.1 million barrels per day in March 2020, and held recently around 11 million bpd due to the coronavirus pandemic, but the United States is still the world's largest oil producer.

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