Oil prices inch higher on output cut support, but U.S. coronavirus spike caps gains

By Sonali Paul
MELBOURNE, July 7 (Reuters) - Oil prices cautiously rose in
early trade on Tuesday with major producers sticking to supply
cuts, but gains were capped as U.S. coronavirus cases surged,
potentially hampering a recovery in fuel demand.
U.S. West Texas Intermediate (WTI) crude CLc1 futures
climbed 13 cents, or 0.3%, to $40.76 a barrel at 0103 GMT,
recouping a 2 cent loss from Monday.
Brent crude LCOc1 futures rose 7 cents, or 0.2%, to
$43.17, adding to a 0.7% gain on Monday.
The market is still being supported by a
bigger-than-expected drawdown in U.S. crude stockpiles reported
last week and by record supply cuts by the Organization of the
Petroleum Exporting Countries (OPEC) and allies, together known
as OPEC+, AxiCorp strategist Stephen Innes said.
However, traders are also closely watching prospects for
U.S. fuel demand, with 16 states reporting record increases in
new cases of COVID-19 in the first five days of July, according
to a Reuters tally. Florida confirmed a record 11,000 cases in a
single day, more than any European country reported in one day
at the height of the crisis.
"Summer driving demand in the U.S. is low, keeping gasoline
demand subdued, and a reintroduction of lockdowns is a major
headwind," ANZ said in a note.
Data from the American Petroleum Institute industry group
later on Tuesday and the U.S. Energy Information Administration
on Wednesday are expected to show a 100,000 barrel rise in
gasoline stockpiles, six analysts polled by Reuters estimated.

Meanwhile a U.S. court on Monday ordered the shutdown of the
Dakota Access pipeline, the biggest artery transporting crude
oil from North Dakota's Bakken shale basin to Midwest and Gulf
Coast regions, over environmental concerns. Market sources in the Bakken said the closure of the 570,000
barrels per day (bpd) pipeline while a thorough environmental
impact statement is completed will likely divert some oil flows
to transportation by rail.