Oil dips, but supply tightness curbs losses

London — Oil prices softened on Tuesday after soaring by more than $5 a barrel in the previous session on expectations that US crude inventories may have risen last week, but tight supplies and a weaker dollar curbed losses.

Brent crude futures for September settlement fell 68c, or 0.6%, to $105.59 a barrel by 9.49am GMT. The contract rose 5.1% on Monday, the biggest percentage gain since April 12 2022.

WTI crude futures for August delivery fell by 32c, or 0.3%, to $102.28 a barrel. The contract climbed 5.1% on Monday and the largest percentage gain since May 11.

The August WTI contract expires on Wednesday and the more actively traded September contract was at $98.85 a barrel, down 57c, or 0.6%.

The forecast of oil inventories in the US, the world’s biggest oil consumer, was that crude and distillate supplies may have risen last week, while gasoline stockpiles likely fell, according to a preliminary Reuters poll.

Oil prices have been whipsawed between concerns about supply as Western sanctions on Russian crude and fuel supplies over the Ukraine conflict have disrupted trade flows to refiners and end users, and rising worries that central bank efforts to tame surging inflation may trigger a recession that would cut future fuel demand.

“Prices climbed aggressively as the tight state of affairs on the supply front shifted back into the spotlight,” Stephen Brennock from brokerage PVM said.

US President Joe Biden visited top oil exporter Saudi Arabia last week, hoping to strike a deal on an oil production boost to tame fuel prices.

However, officials from Saudi Arabia, the de facto leader of the Organisation of the Petroleum Exporting Countries (Opec), did not give clear assurances an output increase was secured.

The kingdom’s foreign minister said on Tuesday that he saw no shortage of oil in the market, but a lack of oil refining capacity, making it necessary to invest more in capacity to process crude oil into various oil products.

“As of today, we don’t see a lack of oil in the market. There is a lack of refining capacity, which is also an issue, so we need to invest more in refining capacity,” foreign minister Prince Faisal bin Farhan Al Saud told reporters in Tokyo.

Oil prices were backed by a softer US dollar on Tuesday, which stood around a one-week low, making greenback-dominated oil slightly cheaper for buyers holding other currencies. 

Reuters