Oil prices move up after earlier losses

Tokyo — Oil prices climbed on Tuesday, reversing some of the previous day’s losses, as tight supply and expectations of a further draw in US crude inventories provided support, though fears over the spreading Covid-19 variant capped gains.

Brent crude for September rose 19c, or 0.3%, to $75.35 a barrel by 4.21am GMT, after losing 0.5% on Monday. US West Texas Intermediate crude for August was at $74.34 a barrel, up 24c, or 0.3%, having fallen 0.6% the previous day.

“Optimism about tight supply and declining US crude stockpiles lent support,” said Toshitaka Tazawa, an analyst at commodities broker Fujitomi. “Still, growing concerns over a spike in Covid-19 infection cases worldwide and uncertainty over production plans by Opec are likely to limit gains.” 

US crude inventories were expected to fall for an eighth consecutive week, while petrol stocks also declined, a preliminary Reuters poll showed on Monday.

Crude stockpiles have declined steadily for several weeks, with US 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 barrels per day in August, to 7.907-million barrels, compared with a 28,000 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 US shale will underpin oil prices.

“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, oil cartel 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 US counterpart Joe Biden did not discuss Opec or global oil prices during an hour-long phone call on Friday, the Kremlin said on Monday.

Reuters