Sonali Paul

MELBOURNE (Reuters – Oil prices rose after two days’ losses. There was some risk appetite back as investors awaited information from the U.S. Federal Reserve chairman about potential rate hikes, and because some oil producers were still struggling to boost their output.

After dropping by 1%, futures advanced 26 cents (or 0.3%) to $81.13/barrel at 0156 GMT.

U.S. West Texas Intermediate crude oil futures increased 30 cents or 0.4% to $78.53 per barrel after dropping 0.8% Monday.

Oil prices were supported by a weaker U.S. Dollar on Tuesday. This makes it cheaper for people who hold other currencies.

The fears that COVID-19, a rising epidemic in the world, could lead to a drop in oil prices have driven the declines of the price of oil over the past two sessions. This may be threatening fuel demand.

Analysts pointed out that the Organization of Petroleum Exporting Countries (Russia and its allies) had a tight supply, which is not sufficient to meet demand.

In a note, ANZ Research commodities analysts stated that the market may still be benefiting from Russia’s tighter supply and increased risk of running out. As Russia increases its presence at the Ukrainian border, political tensions have increased.

Analysts pointed out that OPEC supply adds are running below their permitted increase under the OPEC+ pact as certain countries such as Nigeria aren’t producing their agreed volumes.

Craig Erlam from OANDA said, “The fundamentals are bullish again for crude oil – particularly if OPEC continues struggle to hit its quota under the 400,000 barrels/day monthly increases as demand strengthens.”

Libya is exempted by OPEC supply restraints but has suffered from pipeline maintenance and disruptions to its oil fields. Production at El Feel, which was shut down last month by an armed group, resumed on Monday.

Markets are awaiting U.S. oil inventory and U.S. product data from American Petroleum Institute (API), an industrial group due Tuesday at 2130 GMT, then data from U.S. Energy Information Administration Wednesday.

Six Reuters analysts polled expect that crude oil inventories will fall by approximately 2 million barrels over the week ending Jan. 7. This would be the seventh consecutive week of falling crude inventories.