Oil price ascends from last week’s losses after opening the week with gains in Asia.
The market’s attention reverts to coronavirus-related events which have the most power to undermine global demand in the nearer term.
In the morning charts, Brent oil futures hiked by 0.29% to trade at $55.18 per barrel. The West Texas Intermediate futures followed suit after notching a conservative 0.06% to $52.23 per barrel.
Both contracts are trading above $50 per barrel, considered as the psychological danger zone in the past months, and gained 8% in January.
Investors are currently closely monitoring demand prospects as the world’s second-largest economy and a prime importer of oil reported a slowdown in factory activity.
In January, China reported a 51.3 threshold in its manufacturing Purchasing Managers’ Index. This index shows the overall health in the sector.
This is the indicator’s lowest settlement in the last five months. It is slowed down by a growing number of daily cases in the country.
During the period, Mainland recorded 2,000 infections which forced the government to impose lockdowns in the affected areas.
In turn, the absence of business activity and mobility restrictions resulted in lesser demand for crude oil, for the time being.
Other events in some key markets turned out to be unsupportive of the black gold.
According to an infectious disease expert from the University of Minnesota, the new Covid-19 variant first found in the United Kingdom has the potential to dominate in the US.
Similarly, the trudging vaccination process and the slow approval of new coronavirus vaccines weigh on prospects for a swift economic rebound during the second half of the year.
OPEC Might Save the Day
With the successive bad news, investors are looking for OPEC again for a hint on another round of supply cut.
However, this might not come in handy as the association is adamant about reestablishing the production threshold as with the pre-pandemic environment.
In January, member states’ output rose for the seventh straight month after the easing of output restrictions. They agreed to pump an additional 500,000 barrels per day during the easing.
The countries collectively pumped 25.75 million barrels per day during the month, up by roughly 160,000 barrels per day.
In February, original members plus Russia are reportedly adopting supply restraint anew to support oil price amid fears on demand.
Movements in OPEC production continuously depend on the de facto leader, Saudi Arabia. Right next to it is its fellow high roller Iraq as both set higher quotas in January.