DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange shifted lower in overnight trade, with both crude benchmarks falling nearly 1% after the International Energy Agency revised lower global oil demand estimates for the current year, warning that rebalancing of the global market remains fragile in the early part of 2021 due to the slow vaccine rollout in the European Union and quarantine restrictions on mobility and businesses.

In its monthly Oil Market Outlook released this morning, Paris-based energy watchdog estimated global oil demand is likely grow by 5.4 million barrels per day (bpd) this year to 96.4 million bpd, recovering around 60% of the volume lost to the pandemic in 2020. IEA cautioned, however, the rebalancing of the oil market is still fragile as measures to contain the spread of COVID-19 continue to weigh heavily on the near-term demand. The agency highlighted a more favorable economic outlook expected for later this year that would underpin stronger demand in the second half of the year.

"Renewed lockdowns, stringent mobility restrictions and a rather slow vaccine roll-out in Europe have delayed the anticipated rebound until the second half of the year," said IEA.

On the supply side, IEA estimates a global production rise of 590,000 bpd in January to 93.6 million bpd, as OPEC+ cuts eased and non-OPEC+ pumped more. In February, global output is set to fall as Saudi Arabia implements a sizable voluntary cut. The outlook has improved for countries outside the OPEC+ alliance, with an 830,000-bpd gain expected in 2021 versus a 2020 loss of 1.3 million bpd.

In terms of economic data, U.S. unemployment claims are expected to have decreased modestly from the previous week to 760,000 initial applications filed during the week ended Feb. 6. The number of jobless claims in the United States have steadily declined for the past three weeks, pressing continued applications to their lowest since the start of the pandemic at 4.56 million. Federal Reserve Chairman Jerome Powell said on Wednesday however that the U.S. labor market was a "long way" from a recovery.

"We are still very far from a strong labor market whose benefits are broadly shared," Powell said Wednesday in a speech before the Economic Club of New York. "Achieving and sustaining maximum employment will require more than supportive monetary policy." Powell's speech was made as Biden and Democrats push a $1.9 trillion coronavirus stimulus package that likely will be passed without support from Republican lawmakers.

In early trade, West Texas Intermediate for March delivery futures dipped 36cts from a 13-month spot high settlement of $58.68 per barrel (bbl) and the international crude benchmark Brent contract for April delivery declined 41 cents to $61.06 bbl. NYMEX March ULSD futures dropped 0.79 cent from a one-year spot high $1.7610 gallon, and March RBOB futures fell 1.60 cents to $1.6374 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com