Hope for a rapid recovery in fuel demand and as coronavirus deadlocks were eased, oil prices rose on Tuesday, however, gains are limited with the fear of continued supply surplus in the market.
Brent crude futures rose 0.5%, or 22 cents, by 0647 GMT to $41.02 a barrel. The benchmark contract had fallen $1.50 on Monday, snapping a seven-day streak of gains.
West Texas Intermediate (WTI) crude futures rose 0.8%, or 31 cents, to $38.50 a barrel, after dropping by $1.36 on Monday.
It is better not to be misled by cosidering Brent’s situation, it is necessary to take into account the risk of price withdrawal due to uncertainty in demand and excess stock in the coming weeks.
Tuesday’s gains came when New York, which received the hardest hit in the US due to the new coronavirus outbreak, reopened on Monday after three months and potentially increased fuel demand.
US crude oil and gasoline stocks are estimated to drop by 1.5 million barrels and nearly 100,000 barrels a week by June 5, respectively. However, distillate stocks containing diesel and heating fuel increased 2.9 million barrels.
Demand seems to be recovering slowly and steadily. However, there is still excess supply, so OPEC and its allies need to fully detect the oil entering the market.
The group, known as the Organization of the Petroleum Exporting Countries (OPEC), Russia and OPEC +, agreed on Saturday with a record cut of 9.7 million barrels daily till the end of July.
However, Saudi Arabia said on Monday it will not extend the 1.18 million bpd cut in addition to its OPEC + cuts in July, along with its allies Kuwait and the United Arab Emirates.
Meanwhile, Libya’s National Oil Company (NOC) has instructed employees to close the Sharara oilfield an hour after maintenance operations begin.
Libyan production may be too early for the struggle of supporting oil prices. All production-oriented developments for the oil market should help balance prices.