Singapore — Oil prices climbed on Tuesday, with investors regaining some risk appetite as they await clues from the US Federal Reserve chair on potential interest rate rises and as some oil producers continued to struggle to beef up output.
Brent crude futures gained 40c, or 0.5%, to $81.27 a barrel at 5.29am GMT, after dropping 1% in the previous session.
US West Texas Intermediate (WTI) crude futures rose 52c, or 0.7%, to $78.75 a barrel, after falling 0.8% on Monday.
A weaker US dollar helped support oil prices on Tuesday, as it makes oil cheaper for those holding other currencies.
A US senate committee holds hearings this week for Federal Reserve chair Jerome Powell and vice-chair nominee Lael Brainard that could provide new details about the US central bank’s plans to tighten monetary policy.
Recent oil price declines had been driven by worries about soaring cases of Covid-19 around the world potentially sapping fuel demand.
“Rising virus cases are a cause of concern as restrictions impact mobility and thereby fuel demand,” said Ravindra Rao, head of commodity research at Kotak Securities. “However, despite the sharp rise in cases, none of the major economies are looking at severe lockdowns.”
“The virus situation, supply-related issues and trends in equity markets will be factors affecting crude oil in the near term,” he said.
Some analysts said tight supply from oil cartel Opec not keeping up with demand was also supporting prices.
“The market could still benefit from tighter supplies and supply risk from Russia,” ANZ Research commodity analysts said in a note. Political tension has mounted as Russia has amassed troops on the border of Ukraine.
Analysts pointed to Opec supply additions running below their allowed increase under the Opec pact, as some countries, including Nigeria, are not producing their agreed volumes.
“The fundamentals remain bullish for crude again — especially if Opec continues to struggle to hit its quota as part of the 400,000 barrels a day monthly increases, as demand strengthens,” said Oanda analyst Craig Erlam.
Libya, which is exempt from Opec supply curbs, has been hit by pipeline maintenance work and oilfield disruptions. However on Monday, production resumed at the El Feel oilfield, where an armed group halted output last month.
The market is waiting on US oil and product inventory data from the American Petroleum Institute (API), an industry group, on Tuesday, followed by data from the US energy information administration on Wednesday.
Six analysts polled by Reuters expect US crude stockpiles fell by about 2-million barrels in the week to January 7, which would mark a seventh straight week of declining crude inventories.