Oil steadies amid surging virus cases and US-China tensions

NEW YORK: Oil prices steadied on Monday as traders weighed the positive impact from an OPEC+ deal on production against surging coronavirus cases and heightened tensions between the United States and China.

Brent crude rose 3 cents to $49.28 a barrel by 1:10 p.m. EST (1810 GMT). US crude rose 12 cents to $46.38 a barrel.

Both oil contracts gained around 2% last week after OPEC+, comprising of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, agreed to increase output slightly from January but continue the bulk of existing supply curbs.

"They're remaining a bit stingy, in terms of supplies during the peak northern hemisphere winter," said John Kilduff, partner at Again Capital LLC in New York.

Capital Economics, an economic research company, said in a report it expects OPEC+ output will rise by less than the new agreement allows because of compensatory cuts and weak first quarter demand.

Following OPEC+'s deal, Morgan Stanley increased their long-term Brent price forecast to $47.50 a barrel from $45. They also revised up their long-term WTI price forecast to $45 a barrel from $42.50.

However, prices came under some pressure after Reuters exclusively reported that the United States was preparing to impose sanctions on at least a dozen Chinese officials over their alleged role in Beijing's disqualification of elected opposition legislators in Hong Kong.

Rising tensions between the United States and China, the world's top oil consumers, have weighed repeatedly on the market in recent years.

China, the world's top crude oil importer, has helped support crude markets this year through imports. In the first 11 months of the year, China took in a total of 503.92 million tonnes, or 10.98 million bpd, up 9.5% from the corresponding period last year.

The country's November oil imports rose from a month earlier, data from the General Administration of Customs showed on Monday.

Meanwhile, a surge in coronavirus cases globally has forced a series of renewed lockdowns, including strict new measures in the US state of California and in Germany and South Korea.

US gasoline consumption fell during the Thanksgiving holiday week to the lowest in more than 20 years, OPIS said, as lockdowns weighed on fuel consumption.

Elsewhere, Iran has instructed its oil ministry to prepare installations for the production and sale of crude oil at full capacity within three months, state media said on Sunday.

"Adding to the pressure on oil prices is the potential Iranian increase to production in three months," said Edward Moya, senior market analyst at OANDA. "Iran is optimistic the US will ease restrictions if they return back to the 2015 nuclear deal."