Oil prices rose nearly 2 per cent on Tuesday after more U.S. states eased lockdowns and the European Union sought to attract travellers, though soaring Covid-19 cases in India capped gains.
Futures strengthened in post-settlement trade after American Petroleum Institute estimates of U.S. crude inventories fell more than expected, according to traders.
Brent crude futures settled at $68.88 a barrel, up$1.32, or 1.95 percent. The global benchmark continued to rise after the API data was issued, and was trading $1.80 at $69.36 a barrel by 4:40 p.m. ET. (2040 GMT)
U.S. West Texas Intermediate (WTI) crude futures rose by $1.20, or 1.86 per cent, to settle at $65.69 after a 1.4 per cent jump on Monday. In post-settlement trade the contract traded up $1.65, or 2.56 per cent at $66.14 a barrel.
"Markets were optimistic coming into the day, boosted by flight movement between U.S. and Europe," said Phil Flynn, senior analyst at Price Futures Group in Chicago. Demand for diesel fuel, including jet, has suffered during the pandemic, weighing down global oil markets.
Prices are being supported by the prospect of a pick-up in fuel demand as New York state, New Jersey and Connecticut look to ease pandemic curbs and the EU plans to open up to foreign visitors who have been vaccinated, analysts said.
"Yesterday's stock market strength is being followed through this morning in the oil market ... the market focuses on the successful rollout of vaccine programmes in the U.S. and in other developed countries and not on the devastation in India and Brazil."
Traders saw further signs of rising U.S. crude demand in the API's stockpile data issued late Tuesday. Crude stocks fell by 7.7 million barrels in the week ended April 30. Gasoline inventories fell by 5.3 million barrels and distillate stocks fell by 3.5 million barrels, the data showed, according to the sources, who spoke on condition of anonymity. The U.S. Energy Information Administration weekly statistics are due to be released Wednesday.
Five analysts polled by Reuters estimated on average that U.S. crude inventories fell by 2.2 million barrels in the week to April 30. Oil inventories rose in the previous two weeks.
The rate of refinery utilisation was expected to have increased by 0.5 percentage point last week, from 85.4 per cent of total capacity in the week ended April 23, the poll showed.
A weaker dollar, hit by an unexpected slowdown in U.S. manufacturing growth, also helped to shore up oil prices on Tuesday. The lower dollar makes oil more attractive to buyers holding other currencies.
In India, the total number of infections surpassed 20 million after the country again registered more than 300,000 new cases, which is expected to hit fuel demand in the world's second-most populous country.
"Strong demand forecasts for the second part of 2021 are providing a bullish seat for traders to drive rallies, not allowing any strong negative price reaction to drag for long, even at times of crisis, such as the recent one in India," said Rystad Energy analyst Louise Dickson.
"In fact, looking at balances going forward, prices will likely climb again to about $70 per barrel in the coming months, unless we see another policy change by OPEC+."
