Oil reaching $70 as China energy demand outlook brightens

Oil prices stood steady on Monday, with Brent reaching $70 a barrel, as data showed China’s economic recovery accelerated at the start of 2021, boosting the energy demand outlook at the world’s largest oil importer.

Brent crude futures for May were steady at $69.21, down $0.01 a barrel by 1150 GMT while the US West Texas Intermediate (WTI) crude for April was at $65.62 a barrel, up $0.01.

China’s industrial output growth quickened in January-February, beating expectations, while its daily refinery throughput data rose 15% from the same period a year earlier, data showed.

There is increasing confidence that the global oil demand is rebounding as US Covid-19 death toll is decreasing while China’s apparent oil demand rebounded.

Market structure which encourages prompt consumption of oil, a pact by top producers to keep output largely reined in and a rebound in demand due to vaccine rollouts will keep pushing prices upwards despite any temporary setbacks, analysts said.

“Futures spreads remain in backwardation, and dips in prices remain shallow and short-lived,” said Oanda senior market analyst Jeffrey Halley. “Both (benchmarks) will find a procession of willing buyers if those regions are visited.”

The supply cuts come as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, decided earlier this month to extend most of its supply cuts into April.

Further supporting prices, top oil exporter Saudi Arabia has cut the supply of April-loading crude to at least four north Asian buyers by up to 15%, while meeting the normal monthly requirements of Indian refiners, refinery sources told Reuters on Friday.

Earlier in February, the United States overtook Saudi Arabia to be India’s second-largest supplier, data from trade sources showed.

Separately, US energy firms have cut the number of oil and natural gas rigs in the first weekly drop since November, according to Baker Hughes Co.