(Bloomberg) -- Oil rose a second day in Asia as signs of top producers further reducing output outweighed concerns that a resurgence of coronavirus infections could hurt demand.
Futures in New York advanced 0.2%, after gaining 2.4% on Monday. Saudi Arabia will next month reduce the amount of crude it will supply to seven refiners in Asia, according to refinery officials, after OPEC and its allies agreed to extend historic output cuts through July. Meanwhile, Iraq will cut term oil sales to multiple Asian and European refiners, signaling that the nation is making good on its OPEC+ pledge to trim a global supply glut.
The U.S. shale industry is also still in retreat mode, with output seen declining by 93,000 barrels a day in July, according to the Energy Information Administration’s monthly drilling report. The drop in supply comes amid early signs of a pickup in consumption: United Arab Emirates Energy Minister Suhail Al Mazrouei said demand is rising in China, India and Europe.
Crude’s six-week rally had fizzled out on Friday amid concerns the worst of the virus isn’t yet over and as the U.S. Federal Reserve warned the pandemic could inflict lasting damage on the economy. More than 20 U.S. states are seeing a pick-up in infections, and spreading cases in Beijing have also raised concern of a resurgence.
BP (NYSE:BP) Plc’s announcement on Monday that it will write down the value of the business by the most in a decade underlined the pain being felt across the industry -- Brent crude is still down about 40% since the start of the year.
Tentative signs that motorists are returning from coronavirus-induced lockdowns as shelter-in-place orders are lifted also boosted the market. The gasoline crack spread, the difference between the spot prices of gasoline and crude, touched the highest since May.
OPEC and its allies have agreed to maintain production cutbacks amounting to about 10% of global supply into next month, and will hold committee meetings on Wednesday and Thursday to assess their impact.
©2020 Bloomberg L.P.