However, Covid worries continue to cap gains: File Image/PixaBay
As was the case in the previous session, the onset of Hurricane Laura caused U.S. producers to shut most Gulf of Mexico output and compelled crude traders on Tuesday to give another price boost to oil, this time to the tune of a five-month high.
Registering the highest closes since March 5, Brent rose 73 cents, or 1.6 percent, to settle at $45.86 per barrel, while West Texas Intermediate rose 73 cents, or 1.7 percent, to settle at $43.35.
Approximating the outage spurred 15 years ago by Hurricane Katrina, producers on Tuesday had evacuated 310 offshore facilities and shut 1.56 million barrels per day (bpd) of crude output, the equivalent of 84 percent of total Gulf of Mexico offshore production.
Eugene Lindell, senior crude market analyst, JBC Energy
The world excluding China now needs to cope with rising crude availability
Most analysts believe oil will rise again on Wednesday due to forecasts in advance of American Petroleum Institute data of U.S. crude stockpiles falling for a fifth straight week last week - yet another sign that consumer activity is returning to a semblance of normality despite Covid.
However, the virus continues to dominate analytical thought, this time due to Europe reportedly seeing a rise in infections: "Overall, hurricanes may be limiting supply this week ... but the market will soon again focus on the biggest hurricane of them all, Covid-19," declared Bjornar Tonhaugen, head of oil markets at Rystad Energy.
This is coupled with concerns that while oil prices are holding steady close to $45 per barrel, prices further forward and in the physical market are showing new signs of weakness due to a fall in demand from China after its buying binge earlier in the year.
Eugene Lindell, senior crude market analyst at JBC Energy, said, "The world excluding China now needs to cope with rising crude availability ... as [Saudi Arabia] and other producers have increased production a bit."
Even though Covid worries continue to cap oil gains, generally overlooked are positive developments that may significantly improve economic recovery - and, by extension, demand - in the weeks and months ahead, to wit: the Centers for Disease Control and Prevention has dropped its recommendation for travellers to quarantine for 14 days upon returning from trips overseas or out of state during the pandemic - a move that could dramatically spur air flight numbers both in the leisure and business categories.
Also, despite media's focus on rising Covid rates in Europe, infection rates have dramatically dropped in the U.S., Hong Kong (to the point where social distancing rules have been relaxed), Singapore, and many other countries; this coincides with news that AstraZeneca's vaccine may come to market in North America as early as November (a disclosure that caused S&P and Nasdaq to hit fresh records).