Oil jumps more than 1% on weekly inventory decline forecast

An aerial view of oil tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.

Mario Tama | Getty Images

Oil prices rose on Tuesday, on track to close at near five-month highs, on hopes the United States is making progress on a new economic stimulus package and signs America is making progress on curbing the coronavirus spread.

Brent futures rose 57 cents, or 1.3%, to $44.72 a barrel, while West Texas Intermediate crude rose 69 cents, or 1.68%, to settle at $41.70 per barrel.

Both benchmarks were set to close at their highest since early March.

“Crude prices turned positive on stimulus hopes and after another positive round of economic data showed manufacturing recovery continued in June,” Edward Moya, senior market analyst at OANDA in New York, said, pointing to better than expected manufacturing data in Asia, Europe and the United States.

Negotiations between congressional Democrats and the White House on a new round of coronavirus relief have begun to move in the right direction, though the two sides remain far apart, the U.S. Senate’s top Democrat said on Tuesday.

New U.S. coronavirus cases fell below 50,000 over the weekend for the first time since early July, according to the U.S. Centers for Disease Control.

Despite Tuesday’s price rise, traders said crude remained under pressure due to concerns a fresh wave of COVID-19 infections elsewhere in the world will hamper demand recovery just as major producers ramp up output.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, were boosting output this month by about 1.5 million barrels per day. U.S. producers also plan to restart shut-in production.

In Europe and Asia, meanwhile, concerns are growing that coronavirus may be spreading in a global second wave, said Paola Rodriguez Masiu of Rystad Energy.

In a further sign of a patchy demand rebound, analysts forecast U.S. distillate stockpiles rose while crude and gasoline drew down last week, according to a Reuters poll. The American Petroleum Institute releases its weekly inventory report at 4:30 p.m., followed by government data on Wednesday.

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