Tighter supplies and prospects for further declines in US crude inventories provide support for oil prices. However, fears over the spreading COVID-19 variant are weighing on earnings.
September Brent crude rose 19 cents, or 0.3%, to $75.35 a barrel at 0421 GMT after losing 0.5% on Monday. West Texas Intermediate (WTI) crude for August which was down 0.6% on the previous day, is up 24 cents, or 0.3%, to $74.34 a barrel.
Tight supplies and dwindling US crude inventories have given support to the market, but growing concerns over the rise in COVID-19 infections worldwide and uncertainty about OPEC+’s production plans will likely limit gains.
Crude oil inventories have fallen steadily for several weeks, with US inventories falling to the lowest level since February 2020 in the week of July 2nd U.S. crude inventories are expected to fall for the eighth consecutive week, while gasoline inventories also fell, according to surveys.
China’s crude oil imports in June rose slightly from May, despite falling sharply from a year ago when refineries scrambled for cheap oil to supply the market recovering from the coronavirus.
Investors take into account the possibility of 28,000 barrels of crude output from the seven major shale oil producers in July to rise by 42,000 barrels to 7.907 million barrels per day in August, according to the one-month drilling efficiency report.
The projected increase is still relatively small, and the continued restriction on drilling for US shale gas is very likely to push oil prices forward.
Rising global stocks amidst the hopes for a strong recovery in the economy, also increased the risk appetite in the oil markets. Asian stocks rose in early trade on Tuesday as investors await second-quarter earnings season and a slew of economic data after Wall Street hit record highs overnight.
Still, increasing reports of infections from around the world have caused some investors to be cautious.
The World Health Organization said deaths from the COVID-19 pandemic are rising again and warned that many countries where the Delta variant has become dominant still do not yet have enough doses of the vaccine to even reassure healthcare workers.
Meanwhile, sources say OPEC+ has yet to make any progress in resolving the impasse. No constructive progress has yet been made on the confrontation between Saudi Arabia and the United Arab Emirates, which blocked an agreement last week to increase oil production, making another policy meeting this week less likely.
The Kremlin said on Monday that Russian President Vladimir Putin and his US counterpart Joe Biden did not discuss OPEC+ or global oil prices in an hour-long phone call on Friday.
