By Geoffrey Smith
Investing.com -- Crude oil prices were higher in choppy trading in New York on Tuesday, supported by growing optimism about the U.S. economy’s ability to ride out the summer surge in coronavirus cases.
The number of new Covid-19 cases in the U.S. stayed below 50,000 for the second straight day on Monday, and even though fatalities are still rising at over 1,000 a day, the slowdown in both new infections and hospitalizations has encouraged hopes that no further restrictive measures will be needed to bring the virus under control.
By 10:30 AM ET (1430 GMT), U.S. crude futures were up 1.3% at $42.49 a barrel, while the global marker Brent was up 0.7% at $45.33 a barrel.
However, both were off earlier highs after a surprisingly high producer price inflation number jolted the market’s complacency about the likelihood of near-zero interest rates for the foreseeable future. The numbers didn’t affect oil directly, but triggered a sharp sell-off in gold and silver, both of which had been trading at over-extended levels after a sharp rally.
Risk assets more broadly were supported – if only briefly - by the news that Russia had approved its first vaccine for treating the Covid-19 virus. The effect lasted until it became clear that the drug in question still hasn’t begun – let alone completed – large-scale trials.
The day’s highlight is likely to be the release of American Petroleum Institute data on U.S. oil inventories at 4:30 PM ET. Three big draws in stocks in the last four weeks have been a large factor in keeping prices comfortably above $40 a barrel. However, analysts expect a much smaller draw of only 3.3 million barrels this week, less than half of last week’s 8.6 million.
Reuters reported that the commercial storage numbers are likely to be inflated as companies withdraw oil from the U.S. Strategic Petroleum Reserve, having rented space in the facility during the worst of the demand collapse in Q2.
Reuters noted that some 2.2 million barrels out of 23 million barrels temporarily stored in the SPR has now been withdrawn.