Oil prices appreciated early on Tuesday as a drop in the U.S. dollar made crude a more attractive buy, paring losses of more than 4% incurred overnight on the prospect of producers returning more than 2 million barrels per day of supply to the market by July.
Brent crude futures jumped 83 cents, or 1.3 per cent to $62.98 a barrel after falling 4.2 per cent on Monday, while the U.S. West Texas Intermediate (WTI) crude futures rose 80 cents, or 1.4 per cent to $59.45 barrel, after sliding 4.6 per cent on Monday.
“The weaker U.S. dollar is a contributor, and increasing (U.S.) growth confidence helps,” said Michael McCarthy, chief market strategist at CMC Markets and Stockbroking.
The dollar fell 0.4 per cent against a basket of currencies on Monday and dipped a bit further on Tuesday. Oil prices typically rise against a falling dollar, as a weaker greenback makes dollar-priced oil cheaper for those holding other currencies.
Adding to positive sentiment, England is set to ease coronavirus pandemic restrictions on April 12, with the opening of businesses including all shops, gyms, hair salons and outdoor hospitality areas.
That helped 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.
Saudi Arabia is also set to phase out its extra voluntary cut of 1 million bpd over those three months. At the same time OPEC member Iran, exempt from making voluntary cuts, is boosting supply.
The push by OPEC+ to add supply came despite concerns about a rise in COVID-19 cases.
“Rising virus cases in countries such as India and the European Union are keeping traders cautious, with any renewed restrictions likely to weigh on demand,” ANZ Research said in a note.