Oil up for seventh session as fuel demand slowly recovers

London — Oil prices scored their seventh straight session of gains for both benchmark contracts on Tuesday, hitting their highest since late January 2020, as supply cuts by major producers and optimism over a recovery in fuel demand support energy markets.

Brent crude futures for April gained 41c, or 0.7%, to $60.97 a barrel by 10am GMT. US West Texas Intermediate crude (WTI) for March was at $58.25 a barrel, up 28c, or 0.5%.

“We attribute the latest price surge first and foremost to financial market factors such as the considerable investor optimism and the again weaker dollar, and expect prices to correct,” Commerzbank analysts said in a note.

The dollar was down 0.4% against a basket of currencies, making dollar-priced commodities more attractive to holders of other currencies.

Top exporter Saudi Arabia is squeezing supply in February and March, on top of cuts by producers in the oil cartel Opec and their allies (Opec+), prompting forecasts of a supply deficit this year.

Additionally, Libyan oil production has fallen to 1.04-million barrels per day (bpd) from 1.3-million bpd late in 2020 due to an ongoing strike by the Petroleum Facilities Guards, a Libyan oil source said on Monday.

Signaling no swift return of Iranian barrels into the market, Tehran and Washington appeared to be in deadlock over a resolution of sanctions on the Opec member.

Investors are also pinning hopes on an oil demand recovery when Covid-19 vaccines take effect, while a weak dollar has helped shore up the price of commodities.

Investors are looking ahead to the US weekly oil inventories data due later on Tuesday.

US crude and petrol stockpiles probably rose last week, while distillate stocks were seen down, a preliminary Reuters poll showed on Monday. 

Reuters