Oil climbed on optimism that the resumption of economic activity in the U.S. and Europe will underpin demand in some of the world’s largest economies.
Futures in New York gained as much as 2.1% on Tuesday, touching the highest intraday level since mid-March, while gasoline futures jumped as much as 2.8%. The European Union plans to ease curbs for vaccinated travelers this summer, while in the U.S., New York plans to lift most of it virus restrictions this month. That’s offsetting concerns about weaker oil consumption in parts of Asia, including key importer India, where Covid-19 remains rampant.
“The loss from India, Brazil and other countries that are suffering aren’t going to be as big compared to the gains we get from tourism in the U.S. and Europe in particular,” said Michael Lynch, president of Strategic Energy & Economic Research. “As long as OPEC+ continues the restraint that they’ve shown, that’s going to keep the market relatively tight.”
Oil has been climbing in recent weeks -- amid a broad advance across commodity markets -- as investors bet that the rollout of vaccines will permit a return to pre-pandemic conditions. The world’s 20 major economies are set to back efforts to introduce so-called vaccine passports to boost the beleaguered travel and tourism industry.
The market “is getting increasingly optimistic that an oil demand uptick is getting closer in Europe and the U.S.,” said Louise Dickson, an oil markets analyst at Rystad Energy AS. “The pandemic might be hitting India hard, but in other parts of the world, vaccination campaigns are progressing and should allow key economies to increasingly open up again for both more business and travel.”
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Crude’s gains on Tuesday were outpaced by those in petroleum products, most notably gasoline. In the U.S., profits to produce the fuel were at the highest since April 2020 as optimism grows that a reopening of the economy will boost demand for the fuel. There are already signs in several countries that drivers are getting back in their cars, and retail gasoline prices in the U.S. are already at the highest since October 2018.
Follow live updates of tanker tracking figures throughout the day here.
Meanwhile, OPEC kept its crude production steady in April, ahead of a planned output hike this month. Production fell by 50,000 barrels day, with a setback in Libya largely offset by further gains for Iran.
In the U.S., crude stockpiles are expected to have fallen last week, according to a Bloomberg survey, which would be the first decline in inventories in three weeks if confirmed by U.S. government data on Wednesday. The industry-funded American Petroleum Institute releases its storage tally later Tuesday.
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