Oil rose on optimism that fuel demand will keep rising and tighten the market, despite a Covid-19 resurgence in many regions.
Futures in New York added 0.5% after sliding 0.6% on Monday to settle near $74 a barrel. The vaccine rollout has accelerated the demand rebound across major consumers such as the US, although the rapid spread of the delta variant is a reminder that the recovery will be bumpy. Adding to bullish sentiment, China’s export growth unexpectedly expanded in June amid earlier signs of slowing.
“We have seen this playbook before — it was the European resurgence at the start of the year, then India followed by Southeast Asia,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “In the short term, we might see a bit of jitter across markets, but the fundamental picture has hardly budged.”
While oil has rallied more than 50% this year, the Covid-19 comeback from Asia to the U.S. and the breakdown of OPEC+ supply talks last week is clouding the short-term outlook. The International Energy Agency will provide an updated snapshot of the market later Tuesday.
The window for OPEC+ to boost output in August is closing quickly. Saudi Arabia and the United Arab Emirates — whose dispute derailed a deal — have started to lock in volumes to customers next month, leaving little scope for change even if there is a breakthrough on 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 September settlement added 0.5% to $75.50 on the ICE Futures Europe exchange after losing 0.5% on Monday.
The prompt timespread for Brent was 74 cents a barrel in backwardation — a bullish structure where near-dated contracts are more expensive than later-dated ones. That compares with 95 cents a week earlier.
Indonesia, Southeast Asia’s biggest economy, is being wracked by a brutal wave of Covid-19, with movement 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 stepped up restrictions. Cases in the U.S. have also soared, recording the biggest weekly jump since April 2020.
China’s export growth accelerated to 32.2% in dollar terms from a year earlier, according to government data. The nation’s crude oil imports rose slightly month-on-month as some refiners emerged from seasonal maintenance.