After falling about 2 percent in the previous session due to rekindled Covid fear, crude prices on Tuesday closed higher as the Organization of the Petroleum Exporting Countries (OPEC) signalled that the market was in good shape and outlook was bullish.
Kicking off the OPEC+ alliance meeting on Tuesday, the cartel's secretary general, Mohammad Barkindo, said fundamentals were strong but cautioned that the market is "not completely out of the woods yet."
Barkindo added that demand in 2021 was expected to grow by 6 million barrels per day (bpd), with 5 million of that in the second half.
Rebecca Babin, CIBC Private Wealth Management
We'll see the trading continue to be choppy until Thursday
Given demand recovery around the world due to the effective rollout of the Covid vaccines, OPEC and its allies are expected to increase output by 550,000 bpd; accordingly, Rebecca Babin, senior energy trader at CIBC Private Wealth Management, noted that "We'll see the trading continue to be choppy until Thursday when the actual meeting is held and we get the official decision."
Although news media (along with OPEC) worried that the Delta variant could be a threat to recovery (even though the variants are causing only sporadic surges and the current vaccines are effective against them), demand recovery continues unabated: the country hardest hit by the virus, India, reported that its fuel demand will reach pre-Covid levels by the end of this year.
Dharmendra Pradhan, oil minister for India, said, "There are signs of demand resurgence due to lifting of lockdowns and gradual pickup in economy; we are confident by the end of the year, we will be in a very robust position to restore our original consumption behaviour."
However, Pradhan's country is facing pricing pressures due to over 80 percent of its oil being imported, and he added that "I'm persuading my producer friends; I hope the prices will be little bit sober, that's our expectation."