Oil gains more than 1% as economic data spurs optimism

Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas.
Nick Oxford | Reuters

Strong economic data from China and the United States helped to lift oil prices on Tuesday, recouping some of the previous session's losses, as coronavirus-led volatility continues to dominate.

Brent rose 59 cents to settle at $62.74 per barrel. U.S. West Texas Intermediate (WTI) crude settled 68 cents, or 1.16%, higher at $59.33 per barrel.

Both contracts fell by about $3 on Monday, pressured increasing OPEC+ oil supply and rising COVID-19 infections in India and parts of Europe.

Coronavirus-related deaths worldwide crossed 3 million on Tuesday, according to a Reuters tally, as the latest global resurgence of COVID-19 infections challenges vaccination efforts across the globe.

"The current situation is fragile, therefore revisiting the recent highs (of oil prices) ... is not imminent," said PVM analyst Tamas Varga.

"Until there are palpable signs of falling infection rates the oil market is likely to remain violent and hectic."

Market sentiment was buoyed as March data showed U.S. services activity hit a record high. China's service sector has also gathered steam with the sharpest increase in sales in three months.

In addition, England is set to ease more coronavirus restrictions on April 12, with the opening of businesses including all shops, gyms, hair salons and outdoor hospitality areas.

However, new restrictions in most of Europe and rising infections in India weighed on prices.

"This will likely raise concerns over demand, given that, at the moment, a large part of the constructive outlook for the oil market is based on the assumption that we see a strong demand recovery over the second half of this year," ING analyst Warren Patterson said.

Those factors helped to offset worries about the agreement last week by the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to bring back 350,000 barrels per day (bpd) of supply in May, another 350,000 bpd in June and a further 400,000 bpd or so in July.

The market's attention is now on indirect talks between the United States and Iran in Vienna to revive the 2015 nuclear deal between Tehran and world powers, which could lead to Washington lifting sanctions on Iran's energy sector.

Goldman Sachs said any potential recovery in Iranian oil exports would not be a shock to the market and full recovery would not occur until summer 2022.

Traders also breathed a sigh of relief after a tanker faced difficulties in the south of the Suez Canal but soon continued its journey.

The Suez Canal Authority (SCA) told Reuters the issue had lasted about 10 minutes and "was fixed".

Oil prices spiked in late March after a giant container ship blocked the canal for days.

Meanwhile, escalating tensions between Saudi Arabia and India continued. Indian state refiners plan to buy 36% less oil from Saudi Arabia in May than normal, three sources said.