Oil rose towards $82 a barrel on Tuesday, supported by tight supply and hopes that rising coronavirus cases and the spread of the Omicron variant will not derail a global demand recovery.
OPEC supply additions are running below their allowed increase under a pact with allies due to a lack of capacity in some countries. Major economies have avoided a return to severe lockdowns, even as coronavirus cases soar.
“Despite continuously rising Omicron cases, European governments have taken the view that the time is now right to ease restrictions, raising the hopes of oil demand recovery,” said Tamas Varga of oil broker PVM.
Brent crude gained 88 cents, or 1.1%, to $81.75 a barrel at 0915 GMT, after dropping 1% in the previous session. U.S. West Texas Intermediate (WTI) rose 95 cents, or 1.2%, to $79.18, after falling 0.8% on Monday.
The price of Brent rose 50% in 2021 and has rallied further in 2022 as investors see Omicron having a limited effect on demand while OPEC and its allies, known as OPEC+, slowly ease record output cuts made in 2020.
“Omicron has yet to wreak the havoc of the delta variant and may never do so, keeping the global recovery on track,” said Jeffrey Halley, analyst at brokerage OANDA.
A weaker U.S. dollar also helped support oil on Tuesday, as it makes oil cheaper for those holding other currencies and tends to reflect higher investor risk appetite.
In what would be a further indication of tight supply, the latest weekly reports on U.S. inventories are expected to show U.S. crude stockpiles fell by about 2 million barrels. This would be the seventh straight week of decline.