By Adedapo Adesanya
Crude oil prices rose on Tuesday as a result of continued fears of fuel shortage in the United States due to an outage at the largest fuel pipeline system in the world’s largest oil consumer and producer.
At the market yesterday, the value of the Brent crude increased by 0.19 per cent or 13 cents to sell at $68.68 per barrel while the US West Texas Intermediate (WTI) moved up by 17 cents or 0.19 per cent to trade at $65.45 per barrel.
On Monday, Colonial Pipeline, which transports more than 2.5 million barrels per day of petroleum, diesel and jet fuel in the US, said it was working to restore much of its operations by the end of the week.
This led to a rise in the price of petrol in the country, a sign that if this continues, it may yet rise further.
According to reports, fuel supply disruption has driven prices at the pump to multi-year highs as well as a spike in demand in some areas served by the pipeline as motorists fill their tanks.
To arrest the development, authorities have stepped in to ensure that fuel distributors and truck drivers prevent shortages by using waivers.
On Tuesday, the Organisation of the Petroleum Exporting Countries (OPEC) raised its forecast for demand for its crude by 200,000 barrels per day and this supported the rise in prices. By doing so, the cartel stuck to its prediction of a strong recovery in global oil demand this year as growth in China and the United States counters the coronavirus crisis in India.
World oil demand is set to average 96.5 million barrels per day in 2021, OPEC said in its closely-watched Monthly Oil Market Report (MOMR). This would be nearly 6 million barrel higher than the demand last year, with the acceleration expected in the second half of 2021.
The Vienna-based organization revised down its estimates for global oil demand for the second quarter by 300,000 barrels per day due to lower-than-expected demand in North America in the first quarter and the COVID-19 resurgence in India and Brazil.
However, the organization raised its outlook for oil demand for both the third and fourth quarters of 2021 by 150,000 barrels per day and 290,000 barrels per day, respectively.
Prices were also supported by expected draw in crude inventories. The American Petroleum Institute (API) on Tuesday reported a draw in crude oil inventories of 2.533 million barrels for the week ending May 7.
Analysts had predicted a draw of 2.817 million barrels for the week.
In the previous week, the API reported a massive draw in oil inventories of 7.688 million barrels after analysts had predicted a draw of 2.346 million barrels.
This can further lead to a bullish outcome if confirmed by the Energy Information Administration (EIA) in its report set to be released on Wednesday.
The market continues to monitor happenings in India, where rising coronavirus cases have clamped down on oil demand with imports set to drop due to call for a lockdown since cases showed no signs of subsiding.
Modupe Gbadeyanka