Oil jumps 2% on supply cut optimism

A kayaker passes in front of an offshore oil platform in the Guanabara Bay in Niteroi, Brazil, Saturday, Feb. 1, 2020.
Dado Galdieri | Bloomberg | Getty Images

Oil prices rose on Tuesday, as traders said concerns about a resurgence in coronavirus cases were offset by recent commitments from major oil producers to curb production.

Brent crudegained 27 cents, or 0.66%, to trade at $41.11 per barrel. West Texas Intermediate crude gained 75 cents, or 1.96%, to settle at $38.94 per barrel.

Fuel demand has recovered from April's collapse brought on by lockdowns to control the pandemic. Analysts have said, however, that the oil market's rapid surge to more than $40 a barrel may be banking an overly optimistic view of consumption.

"A second wave of the pandemic isn't such a distant possibility any more and if it is realized, oil demand, which has slowly been recovering, might plunge back to lockdown levels," said Bjornar Tonhaugen, Rystad Energy's head of oil markets.

The coronavirus has killed more than 400,000 people worldwide, and the number of new daily cases hit a record on Sunday as the pandemic has yet to peak in central America, the World Health Organization (WHO) said on Monday.

Goldman Sachs raised its 2020 forecast for Brent to $40.40 a barrel and WTI to $36 but warned that prices are likely to pull back in the coming weeks because of demand uncertainty and inventory overhang.

U.S. crude inventories have been growing as the pandemic curbs demand, but were forecast to have declined last week, ahead of weekly reports by industry group the American Petroleum Institute at 4:30 p.m. EDT (2030 GMT), and the government on Wednesday.

Supportive for the market, Libya said it declared force majeure on some exports from its Sharara oilfield on Tuesday, after production was briefly halted by an armed group just days after output had resumed following a blockade that had lasted months.

Oil has dropped despite OPEC+ nations agreeing to extend output cuts as Saudi Arabia, Kuwait and the United Arab Emirates said they would not maintain supplemental reductions that amount to more than a million barrels of daily supply.

The Organization of the Petroleum Exporting Countries, Russia and other producers, a group known as OPEC+, on Saturday agreed to extend record cuts of 9.7 million barrels per day (bpd) until the end of July.