NEW YORK: Oil prices slipped on Tuesday from seven-year highs, pressured by speculation that producer group OPEC+ could decide to boost supply by more than flagged previously as well as expectations of a rise in US inventories.
While the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, has been expected to maintain its policy of gradual production increases at a monthly meeting on Wednesday, Goldman Sachs said there was a chance of a faster ramp up given the pace of the market’s recent rally.
However, an OPEC+ technical panel did not discuss a hike of more than the expected 40,000 barrels per day from March at a meeting on Tuesday, sources said.
“The Saudis will likely avoid any major adjustments as they have proven adept in recent years at treading a fine line in manoeuvring global pricing in their preferred direction,” said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.
Brent crude was down 36 cents, or 0.4%, at $88.90 a barrel by 11:54 a.m. EDT (1654 GMT). US West Texas Intermediate crude slipped 45 cents, or 0.5%, to $87.70 .
The market was also pressured by expectations that this week’s US supply reports will show an increase in crude stockpiles. Analysts expect stocks to have risen by 1.8 million barrels.
The first of this week’s two supply reports, from the American Petroleum Institute, is out at 4:30 p.m. (2130 GMT).
Brent and US crude had hit their highest prices since October 2014 on Friday, at $91.70 and $88.84 respectively. They gained about 17% in January on a supply shortage, political tensions in the Middle East and between Russia and the West over Ukraine.
OPEC undershot its promised output boost in January, a Reuters survey found, and the rally was expected by other analysts to persist.
“The oil market is currently unreservedly bullish,” said Tamas Varga of oil broker PVM. “It is international tension, the perception of tight supply and the cold winter that are the most important factors behind the strength.”
Rising differentials in the physical crude market imply concern about tight supply, Varga said. One of the North Sea crudes that underpins Brent, Ekofisk, was bid on Monday at its highest in more than a decade.