Oil futures traded higher Tuesday, with crude up as traders return from a three-day weekend in the U.S. and U.K., encouraged by continued cuts in production and a pickup in demand as lockdowns ease around the world with the coronavirus pandemic receding.
West Texas Intermediate crude for July delivery CL.1, 3.76% CLN20, 3.76% on the New York Mercantile Exchange rose 75 cents, or 2.3%, to $34 a barrel. August Brent crude BRNQ20, 2.16%, the global benchmark, was up 50 cents, or 1.4%, at $36.62 a barrel.
“While the market continues to work towards balancing itself, there has been very little in the way of a fresh catalyst recently to drive the market higher,” said Warren Patterson, head of commodities strategy at ING, in a note.
Analysts said optimism over easing lockdowns and news of progress toward a vaccine were lifting overall appetite for risk assets. U.S. stock-index futures pointed to strong opening gains for Wall Street Tuesday.
Underlying support is tied to optimism over production cuts by the Organization of the Petroleum Exporting Countries and its allies, as well as a drop in drilling activity by U.S. shale producers who were hit hard by the collapse in demand during the pandemic.
Oil-field services firm Baker Hughes on Friday reported a 10th straight weekly decline in the number of U.S. oil rigs.
WTI broke a six-day winning streak on Friday, while U.S. markets were closed Monday for the Memorial Day holiday. ICE Brent crude rose Monday.
Analysts said remarks Monday by Russia’s energy minister, Alexander Novak, were also supportive. Novak said the global oil market was on track to balance by June or July, news reports said.
Meanwhile, the U.S. Oil Fund USO, 1.23% ETF said in a filing to the U.S. Securities and Exchange Commission that it may be limited in its ability to buy oil futures and may be required to invest in other permitted investments including other oil-related interests and may hold larger amounts of U.S. Treasuries, cash and cash equivalents.