Oil prices climbed on Tuesday as optimism that government stimulus will buoy global economic growth and oil demand trumped concerns that renewed COVID-19 pandemic lockdowns globally could cool fuel consumption.
Brent crude futures for March gained 55 cents, or 1%, to $55.30 a barrel by 0737 GMT after slipping 35 cents in the previous session.
U.S. West Texas Intermediate crude was at $52.52 a barrel, up 16 cents, or 0.3%. There was no settlement on Monday as U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.
Investors are upbeat about demand in China, the world’s top crude oil importer, after data released on Monday showed its refinery output rose 3% to a new record in 2020. China was also the only major economy in the world to avoid a contraction last year as many nations struggled to contain the COVID-19 pandemic.
“Yesterday’s data out of China was a positive for oil prices,” Michael McCarthy, chief market strategist at CMC Markets in Sydney said.
Investors are watching out for U.S. President-elect Biden’s inauguration speech on Wednesday for details on the country’s $1.9 trillion aid package.
OANDA’s Asia-Pacific senior analyst Jeffrey Halley said: “Like other asset classes, oil has received a gentle U.S. stimulus tailwind in Asia.”
Oil prices have also been supported by Saudi Arabia’s additional supply cuts in the next two months which are expected to draw down global inventories by 1.1 million barrels per day in the first quarter, ANZ analysts said.
Concerns about rising COVID-19 cases globally and renewed lockdowns weighing down fuel demand kept a lid on oil prices.
ANZ analysts flagged concerns about falling fuel sales in India in January from December and rising COVID-19 cases in China and Japan that could dampen oil demand.
“In Europe and the U.S., the slow rollout of vaccines is also raising concerns that a rebound in demand will remain elusive,” the bank said.
Reporting by Florence Tan; Editing by Richard Pullin and Kenneth Maxwell