The MTM Savannah oil and chemical tanker, left, and another vessel wait to enter the Suez Canal in Egypt. Picture: BLOOMBERG/ISLAM SAFWAT
The MTM Savannah oil and chemical tanker, left, and another vessel wait to enter the Suez Canal in Egypt. Picture: BLOOMBERG/ISLAM SAFWAT

London — Oil rose above $69 a barrel on Tuesday, recouping some of the previous session’s 7% slide, as a tight physical market pushed aside concerns about higher Opec+ supply and rising Covid-19 infections weakening the outlook for demand.

In a sign of tight supply, crude inventories in the US are expected to fall for a ninth week. Oil cartel Opec expects world demand to grow by 6.6% in 2021, with the expansion focused on the second half of the year.

“The oil market is still facing a supply deficit over the remainder of the year. This should limit the downside for oil prices,” said Stephen Brennock of oil broker PVM. “That being said, the market is clearly unsettled about the demand outlook.”

Brent crude gained 82c, or 1.2%, to $69.44/bbl by 8.10am GMT after sliding 6.8% on Monday. US crude for delivery in August, which expires later on Tuesday, was up 93c, or 1.4%, at $67.35, after falling 7.5% on Monday. The September US crude contract was up 1% at $67.01.

“Investors should keep in mind that the US economy, the world’s largest buyer of oil, is rapidly recovering,” said Naeem Aslam of online broker AvaTrade.

Monday’s sell-off, which pushed oil to its lowest in two months and hit other risk assets such as equities, was driven by concern that rising Covid-19 infections could cause demand to weaken again, just as OPEC+ has decided to add supply.

The Delta coronavirus variant is now the dominant strain worldwide, US officials said on Friday. US cases of Covid-19 are up 70% compared with the previous week and deaths are up 26%, with outbreaks occurring in parts of the country with low vaccination rates.

Oil was also hit after Opec and allies,collectively known as Opec+, reached a compromise on Sunday to increase output.

Reuters

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