NEW YORK: Oil prices were little changed on Tuesday, as prospects of tight inventories across the globe were offset by forecasts of an increase in production in coming months and concerns over rising coronavirus cases in Europe.
Brent crude was up 2 cents, or 0.1%, at $82.04 a barrel, by 1610 GMT, while US West Texas Intermediate (WTI) crude fell 37 cents, or 0.4%, to $80.50 a barrel.
“The oil market will remain tight in the short term, which should lend support to prices,” said Commerzbank analyst Carsten Fritsch.
Trafigura’s Chief Executive Officer Jeremy Weir said the tightness in global oil markets was due to the return of demand to pre-pandemic levels.
Oil output from the Permian, located in Texas and New Mexico, is forecast to reach a record 4.953 million barrels per day (bpd) in December, as output has come back with the surge in economic demand.
US crude oil stocks were expected to have risen for a fourth straight week, with analysts in a Reuters poll forecasting a build of about 1.4 million barrels last week.
The first of two weekly supply reports, from industry group the American Petroleum Institute, is due later Tuesday.
However, the International Energy Agency (IEA) said the oil market rally may ease off as high prices could provide a strong incentive to boost production, particularly in the United States.
The IEA said it expected average Brent prices to be around $71.50 per barrel in 2021 and $79.40 in 2022.
OPEC Secretary General Mohammad Barkindo said that he expects an oil supply surplus as early as December and the market to remain oversupplied next year.
The Organization of the Petroleum Exporting Countries last week cut its world oil demand forecast for the fourth quarter by 330,000 bpd from last month’s forecast, as high energy prices hampered economic recovery from the COVID-19 pandemic.
Worries about demand destruction also weighed as Europe has again become the epicentre of the COVID-19 pandemic, prompting some governments to consider re-imposing lockdowns, while China is battling the spread of its biggest outbreak caused by the Delta variant.
The Biden administration has been considering tapping US emergency stockpiles to cool rising oil prices. However, the acting head of US Energy Information Administration said that a release of oil from US Strategic Petroleum Reserve (SPR) would likely have only a short-lived impact on oil markets.
“The market looks fundamentally solid with strong physical markets, but with a lack of shorts in the market and SPR fears, the market simply cannot rally,” Scott Shelton, energy specialist at United ICAP said.
The dollar touched a 16-month high against a basket of currencies after strong US retail sales data. A stronger dollar makes oil more expensive for buyers using other currencies.
Germany’s energy regulator also suspended the approval process for Nord Stream 2, a major new pipeline bringing Russian natural gas into Europe, driving up regional prices.
Higher prices for the fuel tends to boost oil demand as utilities switch to burning crude, rather than natural gas.
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