Oil eases as investors take profit after 5-day rally By Reuters
By Yuka Obayashi
TOKYO (Reuters) – Oil markets eased on Tuesday after a five-day rally as investors took profits on fears that higher prices may weaken fuel demand, though market sentiment remained firm amid tight supply.
Futures dropped 17 cents or 0.2% to $79.36 per barrel at 0121 GMT. They had risen 1.8% on Monday and reached their highest level since October 2018.
U.S. West Texas Intermediate crude oil futures fell 9 cents or 0.1% to $75.36 per barrel. The price had risen by 2%, and was at its highest level since July 2018.
Toshitaka Takawa, an analyst with Fujitomi Securities Co Ltd said that oil markets had taken a break after a prolonged rally. He added that some investors were taking advantage of the profits and that concerns about rising oil prices reducing fuel demand are also present.
He said that “Still the market sentiment was strong with tighter supplies” and predicted that Brent might attempt a $80 per barrel.
Sources at the oil companies warn that top African oil exporters Angola and Nigeria will have trouble boosting output to their OPEC quota levels by next year due to underinvestment and nagging maintenance issues.
This battle is similar to that of several other members in the OPEC+ group, who cut production during COVID-19’s peak demand but now fail to boost output to keep up with rising fuel demands as countries recover.
Goldman Sachs’ (NYSE:), $10 increase in its Brent crude price prediction for the year ended June 1st to $90 per barrel has boosted investors’ risk appetite. The rapid recovery in fuel demand following the outbreak of Delta version of the coronavirus, Hurricane Ida’s damage to U.S. output and rapid tightening of global supply has led to an increase in global availability.
Analysts say climbing prices of spot liquefied (LNG) and coal may also bolster oil prices further.
Vivek Dhar, a commodities analyst at Commonwealth Bank, stated that oil demand may rise by 0.5 million barrels per daily, which is 0.5% more global oil supply.
He said that this is likely to further tighten the oil market, particularly with OPEC+’s supply increases remaining conservative. However, he added that prices may still rise if winter in the northern hemisphere proves colder than anticipated.
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