Oil futures rose Tuesday, finding support as traders turned their attention to easing COVID-19 restrictions in the U.S. and Europe, which look to help boost energy demand.
In the U.S., demand is surging, and combined with plans to ease U.K. restrictions on air travel, those developments are “offsetting concerns about demand destruction in India and the worries about the return of supply from Iran,” said Phil Flynn, senior market analyst at The Price Futures Group.
Indian Prime Minister Narendra Modi, meanwhile, is “vowing to not shut down the Indian economy despite a lot of outside pressure to do so,” Flynn said in a Tuesday note.
West Texas Intermediate crude for June delivery rose 81 cents, or 1.3%, to $65.30 a barrel on the New York Mercantile Exchange. July Brent crude, the global benchmark, was up 96 cents, or 1.4%, at $68.52 a barrel on ICE Futures Europe.
“Investors remain squarely focused on reopening optimism this week amid hopes that the easing of lockdown restrictions in the U.S. and Europe will result in a rise in fuel demand,” said Sophie Griffiths, market analyst at Oanda, in a note.
The European Commission on Monday proposed welcoming fully COVID-19-vaccinated travelers and tourists from countries with “a good epidemiological situation.” European airline shares jumped.
In the U.S., several states began lifting or announced plans to lift or ease lockdown restrictions. The average number of new cases in the U.S. fell below 50,000 a day for the first time since October. Nearly 1.67 million people were screened at U.S. airport checkpoints on Sunday, according to the Transportation Security Administration, the highest number since mid-March of last year.
“Europe’s plans to curb travel restrictions is music to the ears of oil bulls. When added to Fed Chair Powell’s comments that the U.S. economic recovery is making real progress, this is supportive of higher oil prices,” Griffiths wrote.
The improving picture in the U.S. and Europe stands in contrast to India, the world’s third-largest oil importer, where a deadly surge in COVID cases has yet to let up. Indian hospitals remain overwhelmed by cases and lacking in supplies including oxygen.
“For now, the market has moved past India and is focused on U.S. and European reopening. However, we know the COVID picture is fluid and could keep gains in oil capped,” Griffiths said.
Meanwhile, data from Bloomberg revealed that the Organization of the Petroleum Exporting Countries kept oil production mostly steady in April ahead of output increases that kicked in this month.
OPEC pumped an average of 25.27 million barrels a day in April, roughly 50,000 barrels a day less than in March, according to the Bloomberg survey.
Traders also looked ahead to a weekly update on U.S. petroleum supplies from the Energy Information Administration due out Wednesday.
On average, analysts polled by S&P Global Platts forecast a decline of 3.9 million barrels in crude supplies. That would follow back-to-back weekly increases.
The survey also showed expectations for inventory declines of 500,000 barrels for gasoline and 1.6 million barrels for distillates.
On Nymex Tuesday, June gasoline added 1.6% to $2.14 a gallon and June heating oil rose 1.6% to $1.98 a gallon.
June natural gas traded at $2.95 per million British thermal units, down 0.5%.