Oil prices climbed on Tuesday, reversing some of the previous day’s losses, as tight supply and expectations of a further draw in U.S. crude inventories provided support, although fears over the spreading COVID-19 variant capped gains.
U.S. West Texas Intermediate crude for August was at $74.48 a barrel, up 29 cents, or 0.39%, having fallen 0.6% the previous day.
“Optimism about tight supply and declining U.S. crude stockpiles lent support,” said Toshitaka Tazawa, an analyst at commodities broker Fujitomi Co.
“Still, growing concerns over a spike in COVID-19 infection cases worldwide and uncertainty over production plans by OPEC+ will likely limit gains,” he added.
U.S. crude inventories were expected to fall for an eighth consecutive week, while gasoline stocks also declined, a preliminary Reuters poll showed on Monday.
Crude stockpiles have declined steadily for several weeks, with U.S. inventories falling to the lowest since February 2020 in the week to July 2.
China’s crude imports in June edged up slightly from May, though they were down sharply from a year earlier when refiners snapped up cheap oil to supply a market recovering from the coronavirus.
Investors shrugged off the Energy Information Administration’s (EIA) monthly drilling productivity report which said crude output from seven major shale formations is expected to rise by 42,000 bpd in August, to 7.907 million bpd, compared with a 28,000 bpd rise in July.
“The predicted increase is still relatively small,” said Satoru Yoshida, a commodity analyst with Rakuten Securities, adding that the continued restraint on drilling by U.S. shale will underpin oil prices going forward.
“Bullish global equities amid hopes for a robust recovery in economy also boosted risk appetite in oil markets,” Yoshida said.
Asian shares climbed in early trade on Tuesday after Wall Street hit record highs overnight, as investors awaited the second-quarter earnings season and a batch of economic data.
Still, reports from around the globe of surging infections kept some investors cautious.
The World Health Organization warned the Delta variant was becoming dominant and many countries had yet to receive enough doses of vaccine to secure their health workers.
Meanwhile, OPEC+ is yet to make progress closing divisions between Saudi Arabia and the United Arab Emirates that last week prevented a deal to raise oil output, making another policy meeting this week less likely, OPEC+ sources said.
Russian President Vladimir Putin and his U.S. counterpart Joe Biden did not discuss OPEC+ or global oil prices during an hour-long phone call on Friday, the Kremlin said on Monday.