Oil prices steady as supply concerns offset Omicron fears

Oil prices were little changed on Monday as concerns over oil supply from Kazakhstan and Libya were offset by demand fears stoked by the rapid global rise in Omicron coronavirus infections.

Brent crude fell $0.11, or 0.1%, to $81.64 a barrel at 1442 GMT while US West Texas Intermediate (WTI) crude was down $0.13, or 0.1%, at $78.77.

Both contracts had risen by about $0.5 earlier in the session.

Oil prices gained 5% last week after protests in Kazakhstan disrupted train lines and hit production at the country's Tengiz oilfield while pipeline maintenance in Libya lowered production to 729,000 barrels per day (bpd) from a high of 1.3 million bpd last year.  

Kazakhstan's largest oil venture Tengizchevroil (TCO) is gradually increasing production to reach normal rates at the Tengiz field after protests limited output there in recent days, operator Chevron (CVX.N) said on Sunday.  

"The tailwind lent to oil prices by supply concerns should therefore abate, which suggests that prices will fall this week," said Commerzbank analyst Carsten Fritsch.

A fall in Azeri crude oil exports from Turkey's Ceyhan port lent some support to prices. February exports were set at 14.72 million barrels, down from 17.27 million in January, a schedule seen by Reuters showed.  

Oil is also drawing support from rising global demand and lower than expected supply additions from the Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group collectively known as OPEC+.

OPEC's output in December rose by 70,000 bpd from the previous month, versus the 253,000 bpd increase allowed under the OPEC+ supply deal that restored output that had been cut back in 2020 when demand collapsed during Covid-19 lockdowns.  

The demand recovery and a sharp fall in oil inventories have pushed the market structure for Brent and US crude into deep backwardation.  

A backwardated market structure means the current value is higher than it will be in later months and encourages traders to release oil from storage to sell it promptly.