Oil rose on optimism that despite a resurgence of Covid-19 in many regions, fuel demand will continue to rise and tighten the market.
New York futures were up 0.5% after falling 0.6% on Monday to hover near $ 74 a barrel. The introduction of vaccines has accelerated the recovery in demand from large consumers like the US, although the rapid spread of the Delta variant is a reminder that the recovery will be bumpy. China’s export growth in June added unexpectedly to the optimistic mood, given earlier signs of slowing.
“We’ve seen this playbook before – it was the European boom earlier in the year, then India, followed by Southeast Asia,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “In the short term we might look a little nervous across markets, but the fundamental picture has hardly changed.”
While oil is up more than 50% this year, the comeback of Covid-19 from Asia to the US and the collapse of OPEC + delivery talks last week tarnished the near-term outlook. The International Energy Agency will provide an updated snapshot of the market during Tuesday.
The window for OPEC + to increase production in August is quickly closing. Saudi Arabia and the United Arab Emirates – whose dispute broke a deal – have started tying volumes of customers over the next month, leaving little room for change, even if there is a breakthrough in production quotas.
West Texas Intermediate for August rose 0.5% to $ 74.46 a barrel on the New York Mercantile Exchange at 7:41 a.m. in London.
Brent, for the September settlement, added 0.5% to $ 75.50 on the ICE Futures Europe exchange after losing 0.5% on Monday.
The prompt time span for Brent was 74 cents a barrel in backwardation – a bullish structure where short-term contracts are more expensive than later ones. That compares to 95 cents a week earlier.
Indonesia, the largest economy in Southeast Asia, is hit by a brutal wave of Covid-19, with movement being curbed in the industrial heartland of Java and the tourist enclave of Bali.
Malaysia is still in the midst of a nationwide lockdown while Thailand has just tightened restrictions. Cases have also skyrocketed in the US, seeing the largest weekly increase since April 2020.
China’s export growth accelerated to 32.2% in US dollars, according to the government. The country’s crude oil imports increased slightly compared to the previous month as some refineries emerged from seasonal maintenance.