Oil prices up on positive economic data, but Covid-19 pandemic fears weigh

New York oil prices rose about 2% on Monday on positive economic data from Europe, Asia and the United States, but rising Covid-19 cases globally and oversupply worries fuelled by the prospect of OPEC and its allies easing output cuts limited gains.

Brent crude rose 66 cents, or 1.5%, to $44.18 a barrel by 11:32 a.m. EDT (1532 GMT) while U.S. West Texas Intermediate (WTI) crude gained 81 cents, or 2%, to $41.08.

U.S. manufacturing activity accelerated to its highest level in nearly 1-1/2 years in July as orders increased despite a resurgence in new Covid-19 infections, a survey from the Institute for Supply Management said.

A survey showing manufacturing activity across the euro zone expanded last month for the first time since early 2019 and positive manufacturing data in Asia also boosted oil.

“I think that has really given crude some underlying strength, that the industrial sector is picking back up and that portends well for demand going forward,” said John Kilduff, partner at Again Capital LLC in New York.

Investors, however, continue to worry about an economic recovery as coronavirus cases continue to climb, with known infections in the United States reaching almost 18 million globally and more countries imposing new restrictions or extending existing curbs in an effort to control the pandemic.

The prospect of oversupply also weighed on oil prices as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, prepare to ease oil supply cuts while U.S. shale production begins to increase.

OPEC+ members have been cutting output since May by 9.7 million barrels per day (bpd). This month, cuts will taper to 7.7 million bpd until December.

Russian oil and gas condensate output increased to 9.8 million bpd over Aug. 1-2, from 9.37 million bpd in July, a source familiar with data said.