Oil held near $41 a barrel in New York after the biggest gain in two weeks as investors weighed additional OPEC supply hitting the market against signs of an economic recovery across major economies.
OPEC’s crude output rose last month led by Saudi Arabia ahead of the group and its allies relaxing its historic cuts this month, according to data compiled by Bloomberg. Oil futures added 1.8% on Monday for a second daily increase, tracking stronger equities after US manufacturing rapidly expanded in July, while euro area factories returned to growth.
The futures curve, however, is showing some weakness, with the three-month timespread for benchmark US crude near the widest contango since May, indicating there are some concerns about over-supply.
Oil has been stuck near $40 a barrel since early June as rising virus cases raised doubts about a sustained recovery in consumption. OPEC+ is returning supply to the market just as the outbreak stages a comeback in parts of Asia, with sales of diesel in India appearing to slide sharply last month as several states imposed small-scale lockdowns to curb record daily infection rates.
“The data is very mixed right now, which will add to the uncertainty, and volatility will remain low in the market,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “I’m not optimistic about a wide based recovery just yet.”
WTI’s three-month timespread was at a contango of 90 cents a barrel, narrowing slightly from $1 on Thursday, the widest since May 28. The market structure is where near-dated contracts are cheaper than later-dated ones.
OPEC increased its output by 900,000 barrels a day last month to 23.43 million a day as Saudi Arabia, the United Arab Emirates and Kuwait restored additional production that was cut in June when they amplified efforts to trim a glut. The market will also be watching this week to see if Saudi Aramco cuts the official selling price for its main crude grade for the first time since May.
Meanwhile, US crude inventories fell by 3.5 million barrels last week for a second weekly decline, according to a Bloomberg survey before government data on Wednesday. Industry figures are due Tuesday.
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