Oil prices bounce back on tight inventories, demand worries limit gains

Singapore, Nov 16 (BNA): Oil rebounded from a weak start on Tuesday as worries about tight inventories boosted prices, although optimism was limited by concerns about demand after a recovery in COVID-19 cases in Europe.

Brent crude futures rose 61 cents, or 0.74 percent, to $82.66 a barrel as of 04:21 GMT, while US West Texas Intermediate crude rose 54 cents, or 0.67 percent, to $81.42 a barrel.

“With these oil prices, supply will increase, but it could take six months and inventories are very low. We don’t have a margin of safety,” said Tony Noonan, senior risk manager at Mitsubishi Corp. Reuters reported.

He added, “We have very low inventory levels and if our winter is very cold and OPEC is still slow in increasing supplies, which could raise oil prices.”

Russian crude grades sold in Asia achieved the highest spot bonuses in 22 months for cargo loading in January, trade sources said on Tuesday, extending gains for the fourth consecutive month with strong demand and strong refining margins supporting prices.

However, concerns about demand destruction due to the COVID-19 pandemic remain.

Europe has once again become the epicenter of the spread of the COVID-19 pandemic, leading some governments to consider reimposing lockdowns, while China battles the largest spread due to a delta variable.

The Organization of the Petroleum Exporting Countries (OPEC) last week cut its forecast for global oil demand for the fourth quarter by 330,000 barrels per day from last month’s forecast, as higher energy prices hampered the economic recovery from the COVID-19 pandemic.

Fears of falling demand come as supplies are expected to rise.

Last week, US energy companies added oil and natural gas rigs for the third week in a row, encouraged by a 65% increase in US crude prices so far this year.

US shale oil production in December is expected to reach pre-pandemic levels of 8.68 million barrels per day, according to Rystad Energy.

The US Commodity Futures Trading Commission (CFTC) said on Monday that money managers raised their net US crude futures and options contracts in the week ending November 9.

The group of speculators raised its position in futures and options in New York and London by 11,328 contracts to 353,807 contracts during the period.

HF