VINACHEM

Crude oil futures were higher in mid-morning trade in Asia Jan. 11, paring overnight losses as the supply-demand situation remained supportive even though rising COVID-19 cases worldwide continued to present a near-term risk.

the ICE March Brent futures contract was up 31 cents/b (0.38%) from the previous close at $81.18/b, while the NYMEX February light sweet crude contract was 42 cents/b (0.54%) higher at $78.65/b.

Both crude oil benchmarks had dipped by up to 1.1% overnight, shedding some gains accrued over the last three weeks, as reports of an impending return in Libyan supply and climbing COVID-19 cases worldwide weighed on prices.

Nonetheless, analysts said the overall supply-demand balance remained supportive, with inventory levels still tight and global demand set to recover further even as many countries battle a surge in COVID-19 cases driven by the highly contagious omicron variant.

"The oil market will likely remain very tight as the world learns to live with COVID. Travel bans will continue to be lifted as the focus will go to testing and that should do wonders for international travel once test makers have a better handle of the situation," OANDA senior market analyst Edward Moya said in a Jan. 11 note.

COVID-19 cases in China continued to be a point of concern. The country reported 97 locally transmitted cases as of Jan. 9, according to the National Health commission, up 5 from the day before.

"China continues to grapple with an uptick in COVID-19 cases, with restriction measures kicking in to contain spreads before the Winter Olympics in February. While it may still be too early to say, the risks on watch may be from any disruptions in supply chains aggravating pricing pressures or a shift in China's zero-COVID approach," IG market strategist Yeap Jun Rong said.

Libyan oil output meanwhile is poised to recover to about 1.2 million b/d after state-owned National Oil Corp. reached an agreement with the Petroleum Facilities Guards, paving the reopening of the oil fields of Sharara, El Feel, Wafa and Hamada and the 300,000 b/d Zawiya oil terminal, Libya-based and trading sources said Jan. 10.

This comes after Tengizchevroil, the operator of Kazakhstan's Tengiz oil field, said Jan. 9 production at the field was returning to normal after disruptions caused by protests at the site.

OANDA's Moya said oil prices will likely trade rangebound until more clarity on the outcome of China's approach to tackling its latest COVID-19 outbreak emerges. - Platts-