Oil edged higher on Tuesday, on track for a third day of gains, supported by investor optimism that holiday travel in China would boost fuel demand and by expectations U.S. inventories would show a drop in crude stocks.
Bookings in China for trips abroad during the upcoming May Day holiday point to a continued recovery in travel to Asian countries. U.S. crude inventories are expected to fall by 1.7 million barrels in weekly supply reports.
Brent crude rose 10 cents to $82.83 a barrel at 0805 GMT, while U.S. West Texas Intermediate crude gained 15 cents to $78.91. Both contracts rose over 1% on Monday.
“Investors expressed optimism that Chinese holiday travel would boost fuel demand in the world’s largest oil importer,” said Leon Li, an analyst at CMC Markets.
Involuntary and planned supply cuts also lent support. Iraq’s northern oil exports have shown few concrete signs of an imminent restart after a month of standstill, and members of the OPEC+ producer group are starting a voluntary cut in May.
“Global oil demand, helped by the beginning of the U.S. driving season and Chinese economic revival, will pick up and scale new peaks,” said Tamas Varga of oil broker PVM. “OPEC+ production will remain subdued and could even deteriorate further.”
Still, investors remain wary about central banks in the United States, Britain and the European Union potentially raising interest rates further to curb inflation, which could slow economic growth and dent energy demand.
The U.S. Federal Reserve, the Bank of England and the European Central Bank are all expected to raise rates at their upcoming meetings. The Fed meets on May 2-3.
Traders on Tuesday were awaiting data from industry group the American Petroleum Institute on U.S. stockpiles. Analysts expect crude inventories to fall by about 1.7 million barrels.
The U.S. government’s inventory report is out on Wednesday.
