• OPEC+ offers boost by deciding to keep supply steady
NEW YORK: Oil fell to around $68 a barrel on Tuesday in a choppy session, as easing concerns of a supply disruption in Saudi Arabia and a pause in the US dollar’s recent rally countered the prospects for tighter supply due to OPEC+ output curbs.
Crude hit its highest level since the start of the coronavirus pandemic on Monday after Yemen’s Houthi forces fired drones and missiles at Saudi oil sites on Sunday. Saudi Arabia said it thwarted the strike, however, and prices slipped as supply fears eased.
Brent crude was down 62 cents, or 0.9%, at $67.63 by 12:59 p.m. EST (1759 GMT), pulling back after trading as high as $69.33. It reached $71.38 on Monday, the highest price since Jan. 8, 2020.
US West Texas Intermediate (WTI) fell 91 cents to $64.14, after hitting its highest price since October 2018 on Monday.
“There’s an expectation that we’re going to see another increase in US crude supplies because refineries remain shut down,” said Phil Flynn, senior analyst at Price Futures group.
Last week’s record decline in US inventories came after the shutdown of Gulf Coast refineries due to a winter storm in Texas two weeks ago.
“The market seems to be softening on those concerns. It’s had an incredible run, and it’s due for a correction,” Flynn said.
The latest round of US inventory reports are expected to show crude stockpiles dropped. The first, from the American Petroleum Institute, is due out at 4:30 p.m. EST (2130 GMT).
On Tuesday, the EIA said US crude oil production is expected to decline less than expected in 2021. US crude output is expected to fall by 160,000 barrels per day (bpd) in 2021 to 11.15 million bpd, a smaller decline than its previous forecast of a 290,000-bpd drop.
The Organization of the Petroleum Exporting Countries (OPEC) plus Russia and allies, a group known as OPEC+, decided on Thursday to broadly stick to output cuts, fuelling a rally.
“Caution is advised as prices are, of course, not going to rise forever,” said Bjornar Tonhaugen of Rystad Energy. “A more definite price direction is expected soon, when the US weekly oil inventory reports” are released.
“Dips have been lately viewed as buying opportunities,” said Tamas Varga of broker PVM. “Last week’s OPEC+ meeting will ensure that the global oil balance will get tighter in the foreseeable future.”
Prices gained support from expectations of a US economic recovery after the US Senate approved a $1.9 trillion stimulus package. The US House of Representatives must approve it before it goes to President Joe Biden for his signature.