By Peter Nurse
Investing.com — Oil prices climbed Tuesday, extending the recovery from last week’s selloff as demand shows little signs of slowing down in the U.S., the world’s largest consumer.
By 9:05 AM ET (1305 GMT), futures traded 1.9% higher at $110.05 a barrel, while the contract rose 1.1% to $115.43 a barrel.
U.S. were up 1.2% at $3.8843 a gallon.
A historic high of 42 million people are expected to hit the roads in the United States over the July 4 Independence Day weekend, AAA said Tuesday.
This comes despite the average U.S. retail price of gasoline recently breaking through $5 per gallon for the first time in history, an increase of nearly $2 per gallon from a year earlier.
The 42 million figure, if it comes to pass, would surpass 2019’s peak, when 41.5 million people traveled by vehicle on Independence Day, according to the American Automobile Association.
Adding to the positive tone is the expectation that U.S. President Joe Biden will announce a suspension of the federal tax on gasoline to cushion the impact of high prices on U.S. drivers, a live political topic ahead of midterm elections.
Biden told reporters on Monday that he expects to make a decision by the end of the week on levying the tax, which currently stands at 18.4c a gallon.
“We expect oil demand to improve further, benefiting from the reopening of China, summer travel in the northern hemisphere and the weather getting warmer in the Middle East. With supply growth lagging demand growth over the coming months, we continue to expect higher oil prices,” analysts at UBS said, in a note.
The crude market posted its first weekly decline since April last week on concerns that aggressive monetary tightening could result in a global recession and weigh heavily on fuel demand.
The WTI contract dropped over 9% last week, and didn’t trade on Monday as it was a U.S. public holiday, while Brent fell over 7% last week, and only clawed back 0.9% in the previous session.
On the supply side, Valero Energy has issued an all-clear on Monday after a fire at its 205,000-barrel-per-day Houston, Texas, refinery and said the facility has been returned to routine operations.
Additionally, Libyan oil output has seen a recovery over the last week, with output increasing to 700,000-800,000 barrels a day, up from less than 200,000 barrels a day a week ago.
“Production is likely to remain volatile for the foreseeable future, with protests calling for the resignation of the prime minister unlikely to disappear,” said analysts at ING, in a note.
Weekly U.S. petroleum inventory data will be delayed by a day this week because of a U.S. public holiday on Monday, with the industry data for the week ending June 17 due on Wednesday and U.S. data scheduled for Thursday.
