Oil jumps more than 1%, settles above $40 for first time since March

An aerial drone view of a crude oil storage facility on April 23, 2020 in Cushing, Oklahoma.
Tom Pennington | Getty Images

Oil rose more than 1% on Monday on tighter supplies from major producers and as coronavirus lockdowns continued to ease, but gains were capped by worries that a worldwide rise in new infections might stall a fuel demand recovery.

Brent crude settled 89 cents, or 2.11%, higher at $43.08 per barrel. The West Texas Intermediate crude contract for August, the day's more active contract, gained 71 cents, or 1.79%, to settle at $40.46 per barrel.

Prices were boosted by the plummeting U.S. and Canadian oil rig count, an indicator of future supply, said Andy Lipow, president of consultants Lipow Oil Associates.

"The continued reopening of economies around the world is also helping to bring back demand, perhaps not at pre-COVID levels, but it is helping to eat into the surplus of oil," Lipow said.

Both Brent and U.S. contracts rose about 9% last week, supported by a recovery in fuel demand as lockdowns eased and economic activity resumed.

However, ballooning virus cases in the United States and elsewhere kept prices from moving higher.

South Korea said on Monday for the first time that it was in the midst of a second wave of the coronavirus. The World Health Organization reported a record rise in global cases on Sunday, with the biggest gains from North and South America.

Bank of America (BofA) Global Research has lifted its oil price forecast for this year and next as demand recovers while the OPEC+ output cut deal curtails supply and producers reduce capital expenditure.

OPEC and allies such as Russia, a group known as OPEC+, has yet to decide whether to extend a record supply cut of 9.7 million barrels per day (bpd) into a fourth month, so it runs to the end of August.

Russia said that $40 to $50 a barrel is a fair price.