Crude oil prices rose on Tuesday despite double worries from new restrictions resulting from surging coronavirus cases which could threaten a recovery in fuel demand and producers preparing to increase output from August.
Brent crude futures gained 15 cents or 0.35 percent to $42.87 per barrel, while the US West Texas Intermediate (WTI) crude futures rose 19 cents or 0.47 percent to $40.29 per barrel.
In the earlier session, the market showed its reaction following the decision by California, the United States’ most populous state, to shut bars and restaurants, movie theatres, zoos, and museums as coronavirus cases escalated.
California’s move followed the recent reinstatement of some restrictions in other states such as Florida and Texas. New restrictions were also introduced in Asia and Australia.
This spells worry for the demand side of the market which had been projected to increase by 400,000 barrels per day to 92.1 million barrels per day, according to the International Energy Agency (IEA).
On the supply side, markets are keenly awaiting news from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, on the next level of production cuts.
OPEC’s Joint Technical Committee met on Tuesday and this will be followed by a meeting of the Joint Ministerial Monitoring Committee (JMMC), the major panel, who are due to discuss on Wednesday.
Under the existing supply pact, OPEC+ is set to taper its record production cut of 9.7 million barrels per day to 7.7 million barrels per day from August through December.
OPEC’s monthly report said it expected global oil demand to grow by a record 7 million barrels per day next year, but that demand will still be weaker than it was pre-COVID.
The market received a boost as data showed that the largest crude importer, China’s June crude oil imports hit both daily and monthly highs.
According to data from the General Administration of Customs on Tuesday, China’s crude oil imports jumped by 33 percent in June 2020, for the second straight monthly record.
The world’s top crude oil importer took in 53.2 million tonnes of oil, equivalent to 12.9 million barrels per day.
This topped the previous record of 11.3 million barrels per day in May and was up 34 percent from 9.6 million barrels per day in June 2019.
The market will also be watching for consumption data from the American Petroleum Institute (API) industry group and the US Energy Information Administration (EIA)
Analysts have estimated that crude oil inventories fell by 2.3 million barrels last week.