Oil prices climbed on Tuesday, boosted by the prospect of tight inventories over the globe. Nevertheless, the gains were capped by predictions of an improvement in global production in the upcoming months and worries over growing COVID-19 cases in Europe.
Brent crude held 52 cents, or 0.6%, higher at $82.57 per barrel, by 1110 GMT, and U.S. West Texas Intermediate (WTI) crude rose 42 cents, or 0.5%, to $81.30 per barrel.
Commerzbank (DE: CBKG) analyst Carsten Fritsch stated that the oil market would remain tight in the short term, which should support prices.
Trafigura’s Chief Executive Officer Jeremy Weir stated the tightness in global oil markets was because of the return of demand to pre-epidemic levels.
Weir said at the FT Commodities Asia Summit that it’s not artificially tight because of what OPEC is doing. Demand is there.
The oil rally market might reduce
Nevertheless, the International Energy Agency (IEA) stated the oil market rally might slide off. High prices could provide a solid incentive to increase production, especially in the United States.
The IEA assumed average Brent prices to be about $71.50 per barrel in 2021 and $79.40 in 2022.
On Tuesday, OPEC Secretary-General Mohammad Barkindo stated he assumes an oil supply surplus as early as December and the market to continue oversupplied next year.
He said that the surplus is already starting in December. These are signs that we have to be very, very careful.
High energy prices hindered economic recovery from the coronavirus epidemic. Hence, last week, the Organization of the Petroleum Exporting Countries (OPEC) chopped its world oil demand forecast for the fourth quarter by 330,000 barrels per day (BPD) from the prior month’s forecast.
However, concerns regarding demand destruction because of the coronavirus epidemic pressed.
Europe has again become the epicenter of the coronavirus epidemic. This urged some governments to consider re-imposing lockdowns. Meanwhile, China is battling the spread of its biggest outbreak created by the Delta variant.