Picture: REUTERS
Picture: REUTERS

London — Oil prices extended their rally on the US election day amid a recovery in financial markets on Tuesday, but concerns over surging coronavirus cases around the world capped further gains.

Brent crude futures rose 70 US cents, or 1.8% to $39.67 a barrel at 8.45am GMT, while US West Texas Intermediate (WTI) crude futures were up 78c, or 2.1%, to $37.59 a barrel. Both benchmarks gained nearly 3% on Monday.

“The jump has borne all the hallmarks of a massive, logical and even inevitable short-covering prior to the US presidential elections,” Tamas Varga of oil brokerage PVM said.

“It would be tempting to conclude that the recovery from last week’s slump is now under way, but it is simply not a plausible scenario,” he added.

Italy is the latest country in Europe to tighten Covid-19 restrictions, including limiting travel between the worst-hit regions and imposing a nightly curfew, which will limit fuel demand.

Benchmark prices, down sharply over the past week, had a brief reprieve on Monday after Russia’s oil minister held talks with domestic oil companies on a possible extension of oil output restrictions into the first quarter of 2021.

Opec+ slashed oil output from May to support prices and tapered the cut to 7.7-million barrels per day (bpd) in August. It is due to taper the cuts by two-million bpd in January.

“The hope is now that a continued cut at current levels will be the necessary bridge over the second Covid-19 wave until vaccines are rolled out during [the first half of 2021]," Commerzbank.

Rising production from Libya, which is on course to hit one-million bpd in the coming weeks, from just 100,000 bpd in early September, will also be a concern for Opec+.

Opec+ holds its next full meetings on November 30 and December 1.



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