Oil prices have risen higher extending gains on optimism about fuel demand recovery worldwide, despite a large climb in Covid-19 infections in some US states.
In addition, improvement in the US crude production contributed to prices.
Brent crude rose $0.32 or 0.8% at $41.37 a barrel, while US West Texas Intermediate (WTI) crude futures were up $0.25 or 0.7% to $38.97 a barrel, Reuters reported.
Phillip Futures Singapore commodities senior manager Avtar Sandu was quoted by the news agency as saying: “Optimism about recovering fuel demand worldwide has been supportive of prices despite an increase in total coronavirus infections worldwide and amid signs that US crude production from shale would grow.”
Satellite data showed a huge pick-up in traffic in countries such as China, Europe and the US, analysts said. This data highlighted an improvement in fuel demand.
Road traffic in Shanghai in the past few weeks was higher compared to the same period last year. Meanwhile, traffic was back to last year’s levels in Moscow, according to data by location technology firm TomTom.
However, a spike in Covid-19 infections in southern US states could cap the demand recovery of fuel, as Florida and Texas in the southern part of the country are among the biggest gasoline consumers.
According to Reuters, the recession that is underway is expected to be deeper than earlier expected.
CMC Markets chief market strategist Michael McCarthy said: “It does appear the market is ignoring supply and demand fundamentals and moving on sentiment.”
Furthermore, increased US crude production also capped gains on 26 June.