Picture used for illustrative purpose. File

Oil prices gained 3% as financial markets are on the way to recovery, however, fears over the second wave of coronavirus in the world limited further gains.

Brent crude futures gained $1.13, or 2.9% to $40.10 a barrel at 11:38 GMT on Tuesday, while US West Texas Intermediate (WTI) crude futures increase $1.13, or 3.1%, to $37.94 a barrel. Both benchmarks gained nearly 3% on Monday.

Tamas Varga of oil brokerage PVM said, the jump has borne all the hallmarks of a massive, logical and even inevitable short-covering prior to the US presidential elections.

He added that it would be tempting to conclude that the recovery from last week's slump is now under way, but it is simply not a plausible scenario.

Russia’s oil minister on Monday spoke with domestic oil companies on the probability of extending oil output restrictions into the first quarter of 2021. The meeting led to a reprieve of benchmark prices decreasing sharply.  

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Earlier in the year, the Organization of the Petroleum Exporting Countries and allies including Russia, a group called OPEC+, reduced oil output to support prices. The output was decreased to 7.7 million barrels per day (bpd). They are due to shrink the cuts by 2 million bpd in January.

According to Commerzbank, continued cut at current levels will be the necessary bridge over the second COVID-19 wave until vaccines are rolled out during [the first half of 2021]. 

Increase in production from Libya from 100,000 bpd in September to 1 million bpd in the coming weeks is a cause for concern for OPEC+.

OPEC+ is schedule to  hold its next full meetings on Nov. 30 and Dec. 1.