Oil prices extended their rally on U.S. election day with a 3% gain as financial markets staged a broad recovery, but concerns over surging coronavirus cases around the world capped further gains.
U.S. West Texas Intermediate (WTI) crude futures were up $1.13, or 3.1%, to $37.94 a barrel.
Brent crude futures rose $1.13, or 2.9% to $40.10 a barrel at 1138 GMT on Tuesday. Both benchmarks gained nearly 3% on Monday.
“The jump has borne all the hallmarks of a massive, logical and even inevitable short-covering prior to the U.S. presidential elections,” Tamas Varga of oil brokerage PVM said.
“It would be tempting to conclude that the recovery from last week’s slump is now under way, but it is simply not a plausible scenario,” he added.
Italy is the latest country in Europe to tighten COVID-19 restrictions, including limiting travel between the worst-hit regions and imposing a nightly curfew, which will limit fuel demand.
Benchmark prices, down sharply over the last week, had a brief reprieve on Monday after Russia’s oil minister held talks with domestic oil companies on a possible extension of oil output restrictions into the first quarter of 2021.
The Organization of the Petroleum Exporting Countries and allies including Russia, a group called OPEC+, cut oil output from May to support prices and reduced the reduction to 7.7 million barrels per day (bpd) in August. They are due to shrink the cuts by 2 million bpd in January.
“The hope is now that a continued cut at current levels will be the necessary bridge over the second COVID-19 wave until vaccines are rolled out during [the first half of 2021],” Commerzbank said.
Rising production from Libya, which is on course to hit 1 million bpd in the coming weeks, from just 100,000 bpd in early September, will also be a concern for OPEC+.
OPEC+ holds its next full meetings on Nov. 30 and Dec. 1.