Oil futures settled Tuesday with a gain of more than 1%, a day after the U.S. benchmark suffered its biggest single-session decline since March.

Signs of a tight physical market helped soothe worries over the economic outlook, tied to the spread of the delta variant of the coronavirus that causes COVID-19, and a recent decision by OPEC+ to boost production.

Unless the delta variant “really catches like a brushfire,” the extra oil from OPEC+ is “going to be absorbed without killing crude prices,” said Stewart Glickman, energy equity analyst at CFRA.

West Texas Intermediate crude for August delivery

which expired at the end of the trading session, rose $1, or 1.5%, to end at $67.42 a barrel on the New York Mercantile Exchange. The U.S. benchmark fell 7.5% Monday, its biggest single-session drop since Sept. 8, according to Dow Jones Market Data.

The new front-month, September crude
added 85 cents, or 1.3%, to settle at $67.20 a barrel.

September Brent crude

the global benchmark, tacked on 73 cents, or 1.1%, to $69.35 a barrel on ICE Futures Europe after falling nearly 6.8% Monday — the biggest one-day percentage decline since March.

The “cautious production strategy” of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, will “continue to be dictated by the pace of the global recovery,” said Pratibha Thaker, editorial director, Middle East and Africa, at the Economist Intelligence Unit. Periodic COVID-19 outbreaks will be “watched closely, and the necessary adjustment to output to retain their market share will be made.”

Read: Why the oil market likes the OPEC+ deal but prices don’t show it

Meanwhile, the impact on demand growth from the delta variant of the coronavirus remains a concern, said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. As “the market works through these issues…prices could test the lows from the early part of the second quarter,” he told MarketWatch.

Still, “a solid back-to-school season and diminished inventories mean prices over the rest of 2021 should remain well above average prices from 2020,” Haworth said.

Oil supplies have tightened, with U.S. crude inventories below the five-year average for this time of year. The Energy Information Administration has reported weekly decreases in supplies for eight weeks in a row, and is expected on Wednesday to report yet another decline.

On average, analysts expect the EIA to report a fall of 6.7 million barrels in domestic crude supplies for the week ended July 16, according to a survey conducted by S&P Global Platts. They also forecast inventory declines of 1.1 million barrels for gasoline and 600,000 for distillates.

On Nymex Tuesday, August gasoline

added 1% to $2.13 a gallon and August heating oil

added 1.4% to $2.01 a gallon.

August natural gas

settled at nearly $3.88 per million British thermal unites, up 2.6% — at the highest front-month finish since December 2018.

Read: Why the natural-gas market may come up short on supplies this winter

What's your reaction?

In Love
Not Sure

You may also like

Leave a reply

Your email address will not be published. Required fields are marked *

More in:Latest News