Oil little changed as weaker dollar offsets demand worries

11:48 am Thursday, January 28th, 2021

By Scott DiSavino

NEW YORK (Reuters) – Oil was steady on Thursday as the impact of a weaker dollar and big U.S. crude inventory drawdown offset concerns that delays to vaccine rollouts and fresh travel curbs to prevent new coronavirus outbreaks could depress demand.

Brent futures for March delivery, which expire on Friday, fell 1 cent to $55.80 a barrel by 11:11 a.m. EST (1611 GMT), while U.S. West Texas Intermediate (WTI) crude was 16 cents, or 0.3%, lower at $52.69.

The premium of the Brent front-month over the second month rose to its highest since February 2020 for a fourth day in a row.

The U.S. 3-2-1 crack spread, a measure of the profit margin for refining crude into gasoline and distillate, was on track for its highest close since May 2020, while the gasoline crack spread was on track for its highest close since June 2020.

Oil prices were supported earlier by Wednesday’s data that showed a huge 10 million-barrel drawdown in U.S. crude inventories last week, which analysts said was because of a pick-up in U.S. crude exports and a drop in imports. [EIA/S]

“The draw was a big relief for inventories, especially as it followed a week of builds, putting traders at ease that supply doesn’t overwhelm demand for the time being,” Rystad Energy’s Louise Dickson said.

In addition, the U.S. dollar index <.DXY> flipped into negative territory after earlier gains, which also helped support oil prices. Buyers using other currencies pay less for dollar-priced oil when the greenback falls.[USD/]

Demand concerns, however, weighed on sentiment and prevented oil prices from holding earlier gains.

The U.S. economy in 2020 contracted at its sharpest pace since 1946 as the pandemic depressed consumer spending and business investment, pushing millions of Americans out of work and into poverty, data showed.

A separate report showed 847,000 more people likely filed U.S. jobless claims last week, strengthening views of a persistent labor market weakness.

Stricter vaccine checks by the European Union and delivery hold-ups from AstraZeneca and Pfizer have slowed the rollout of shots. [nL8N2K32GW]

In China, the world’s second-largest oil consumer, a surge in coronavirus cases has led to travel restrictions ahead of the Lunar New Year, normally the busiest travel season of the year.

(Additional reporting by Ahmad Ghaddar in London, Shu Zhang in Singapore and Sonali Paul in Melbourne; Editing by Marguerita Choy and Barbara Lewis)