Oil climbs 1% on economic recovery hopes despite fresh Asian restrictions

·3 min read
FILE PHOTO: A petrol station attendant prepares to refuel a car in Rome

By Devika Krishna Kumar

NEW YORK (Reuters) -Oil prices rose more than 1% on Monday, lifted by European economic reopenings and rising U.S. demand after prices fell earlier due to surging coronavirus cases in Asia and underwhelming Chinese manufacturing data.

Brent crude ended the session up 75 cents, or 1.1%, at $69.46 a barrel and West Texas Intermediate (WTI) crude settled 90 cents, or 1.4%, higher at $66.27.

The British economy reopened, giving 65 million people a measure of freedom after a four-month COVID-19 lockdown.

With accelerating vaccination rates, France and Spain have relaxed COVID-related restrictions, and on Saturday, Portugal and the Netherlands eased travel restrictions.

The promise of economic growth has supported oil prices in recent weeks, although the pace of inflation has kept many investors concerned that interest rates could rise, which could hit consumer spending.

"The news is not all negative on the demand front as the U.S. saw air travel jump on Sunday to 1.8 million people, the highest total since March 2020," said Edward Moya, senior market analyst at OANDA.

United Airlines announced it will add 400 daily flights to July for European destinations, Moya noted.

Summer travel bookings rose 214% from 2020 levels, the airline said, adding it planned to fly 80% of its U.S. schedule compared with July 2019.

Investors remained worried about the coronavirus variant first detected in India. Some Indian states said on Sunday they would extend lockdowns to fight the pandemic, which has killed more than 270,000 people there.

Domestic sales of gasoline and diesel by Indian state refiners plunged by a fifth in the first half of May from a month earlier.

Singapore is preparing to close schools this week and Japan has declared a state of emergency in three more prefectures.

"The market is seemingly trapped between observing encouraging improvements in demand in the United States and Europe, and the sluggishness in consumption due to the persistence of COVID-19 in Asia," StoneX analyst Kevin Solomon said.

China's factories slowed their output growth in April and retail sales significantly missed expectations as officials warned of new problems affecting the recovery in the world's second-largest economy.

China's crude oil throughput rose 7.5% in April from the same month a year ago, but remained off the peak seen in the last quarter of 2020.

Signs of rising supply also capped oil's gains.

U.S. oil output from seven major shale formations is expected to climb by 26,000 barrels per day (bpd) in June to 7.73 million bpd, the first rise in three months, the U.S. Energy Information Administration said in a monthly forecast.

Meanwhile, U.S. retail gasoline prices hit a fresh seven-year high on Monday, as it will take some time for the nation's largest fuel pipeline's supply chain to fully catch up after a cyberattack that resulted in a six-day system outage last week and mass panic-buying.

(Reporting by Bozorgmehr Sharafedin in London, additional reporting by Yuka Obayashi in Tokyo; Editing by Marguerita Choy, Barbara Lewis and David Gregorio)

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