Oil prices extend rally as producers restrain output

Oil prices extend rally as producers restrain output

News from the corporate sector also continued to reverberate through the market, as The Wall Street Journal reported that Exxon Mobil (NYSE:) and Chevron (NYSE:) had discussed merging last spring in the dark days following the Saudi-Russian price war. Both contracts rose more than 2 per cent in the previous session.

Crude oil delivery for February gained Rs 84, or 2.15 percent, to Rs 3,989 per barrel at 15:41 hours IST with a business turnover of 5,514 lots. Oil has risen steadily since late a year ago as coronavirus vaccines and supply curbs from OPEC and its allies spur hopes that global stockpiles will continue to slide. Royal Dutch Shell Plc raided the North Sea market Monday, buying the most benchmark-grade cargoes in a single day in 10 years in the S&P Global Platts pricing window.

"With inventories starting to drop in 2H20, the structure of the futures curve has shifted to become downward sloped". While supply is still tight at the start of 2021, the bank sees all that changing by August of this year.

Oil prices rose more than 1% on Tuesday after major crude producers showed they were reining in output roughly in line with their commitments, extending gains in a market thrown out of kilter by weak demand during the coronavirus pandemic.

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US government data last week showed a 2.3 million-barrel drawdown in stocks at the Cushing, Oklahoma, delivery hub for crude futures.

The oil market is "supported by the combination of tightening fundamentals, as seen through the rising backwardation and the renewed risk appetite in the US stock market", said Ole Hansen, head of commodities research at Saxo Bank A/S. "U.S. supply will also start to turn higher by mid-2021, after facing declines through H2 2020 and H1 2021", Kim noted. It was 7 cents in contango at the beginning of the year.

OPEC oil output rose for a seventh month in January, a Reuters survey found, after the group and its allies agreed to ease supply curbs further, although the production growth was smaller than expected.

China National Offshore Oil Corp. said the nation's lofty climate goals won't interrupt its program to raise oil and gas output. But the coalition will soon be faced with some tough choices.

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