By Adedapo Adesanya
Oil prices, for another day, settled mixed as the market continues to face the prospects of a higher supply in coming months and concerns over rising coronavirus cases in Europe.
Yesterday, the Brent Crude traded at $82.43 per barrel after it gained 38 cents or 0.5 per cent, while the US West Texas Intermediate (WTI) lost 12 cents or 0.2 per cent to trade at $80.76 per barrel.
While the oil market will remain tight in the short term, which would lend support to prices, the global energy watchdog, the International Energy Agency (IEA), said the rally may ease as high prices could provide a strong incentive to boost production, particularly in the United States.
The Paris-based agency said on Tuesday that much of the uptick in supply will come from the world’s largest oil producer.
A hurricane had weakened the main US production and export hub in the Gulf Coast in late August, but the country’s output made up for half the increase in global oil production last month.
However, the IEA said in its monthly report that US production, despite climbing, would not return to pre-pandemic levels until the end of next year. It is due to account for 60 per cent of non-OPEC+ supply gains in 2022.
The agency then noted that Brent Crude prices are expected to average $79.40 next year, indicating a rise in its oil price assumptions for 2021 and 2022. This year, Brent crude prices are set to average $71.50 per barrel.
This is after the Organisation of the Petroleum Exporting Countries (OPEC) last week cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day from last month’s forecast, as high energy prices hampered economic recovery from the COVID-19 pandemic.
Meanwhile, the American Petroleum Institute (API) reported a small inventory build in crude oil that was just enough to keep the market from panicking over dwindling inventories.
This week, the API estimated the inventory build for crude oil to be 655,000 barrels, meaning crude inventories are now 60 million barrels below where they were at the beginning of the year.
Analyst expectations for the week were for a build of 1.550-million barrels for the week.
In the previous week, the API reported a draw in oil inventories of 2.485-million barrels, compared to the 1.90-million-barrel build that analysts had predicted.
The market awaits the official data from the US Energy Information Administration (EIA) on Wednesday.
COVID-19 cases are on the rise again in various parts of Europe as the cold weather has affected the spread of the virus.
Countries on the continent are attempting to curb the spike through various means — from introducing lockdowns for the unvaccinated to limiting access to certain services, or pushing for an increase in vaccination rates, moves that could impact prices.