Oil rose as a brighter outlook for economic growth and summer travel eased concerns around the impact of a resurgent coronavirus.

Futures in New York closed 1.2 per cent higher on Tuesday after easing off session highs as U.S. equities weakened. Oil prices remained supported by the International Monetary Fund’s stronger global growth forecast of a 6 per cent expansion this year and the U.S. government’s expectation for rising gasoline demand this summer as Americans get back on the road.

“We’ve gotten to a point of somewhat equilibrium,” and the market “is in an in-between spot,” said Bill O’Grady, executive vice president at Confluence Investment Management in St. Louis. “To maintain gains, we’re going to have to see the economy pick up and energy demand continue to rise.”

Prices were little changed after the American Petroleum Institute was said to report that U.S. oil inventories fell 2.62 million barrels last week. The report also showed a nearly 4.6 million-barrel gain in gasoline stockpiles, while distillate supplies also rose.

Oil rallied 22 per cent in the first quarter as the rollout of vaccines spurred optimism that demand would rebound, while the Organization of Petroleum Exporting Countries and its allies kept a tight rein on supply. While the consumption recovery in countries like the U.S. is picking up steam, the global rebound remains shaky. In India, state-run refiners are looking to buy less crude from Saudi Arabia as demand in the Asian nation is poised to dip amid a resurgence of COVID-19, and relations between the two countries sour over prices.

“With supply-side support dwindled, marginal price action in oil markets will now shift to demand dynamics, without as much of a safety blanket from the supply side,” TD Securities commodity strategists led by Bart Melek said in a note. “While the demand outlook is expected to improve substantially into the second half of the year, and should keep markets on a tightening path, near term markets are likely to be balanced rather than in hefty deficits as they have been,” weighing on prices.

Meanwhile, investors are also watching whether a nuclear deal with Iran is resurrected. Iran said multiparty talks in Vienna were “constructive,” though the chances of a breakthrough are seen by analysts as slim. Diplomats will meet again in Vienna on Friday to continue negotiations, lead Iranian negotiator Abbas Araghchi said.

Prices

• West Texas Intermediate crude for May delivery was trading at US$59.29 a barrel as of 4:46 p.m. in New York after settling at US$59.33 a barrel
• Brent for June settlement rose 59 cents to end the session at US$62.74 a barrel

The oil market’s bullish backwardation structure has flattened in recent weeks, with the closely-watched spread between the nearest December contracts down by over US$2 a barrel from its March peak. The decline suggests weakening expectations for the health of the market.

Still, in the U.S., gasoline demand is expected to clock in at about 13 per cent higher this summer compared to last, although not yet back at 2019 levels, according to the Energy Information Administration.

On the supply side, restraint from American shale producers is seen holding firm. In a separate report, the EIA slashed its oil production forecast through next year, while Occidental Petroleum Corp. Chief Executive Officer Vicki Hollub said at an online conference that “too much investment” would be required to get domestic output back to a roughly 13 million barrel-a-day peak.

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• Occidental Petroleum Corp. split with some of its larger rivals in rejecting a U.S. carbon tax, preferring the existing system of tax credits designed to encourage oil companies to store carbon dioxide and reduce emissions.