Peter Nurse   

Investing.com — Although oil prices fell Tuesday, some gains were reversed. However, the general tone is bullish as demand in China will increase and supplies remain tight.

By 9:10 AM ET (1310 GMT), futures traded 0.3% lower at $118.10 a barrel, retreating from Monday’s three-month high, while the Brent contract fell 0.3% to $119.14 a barrel.

U.S. gallon prices were 2.8% lower at $4.0737 per gallon

Crude oil prices eased a little as market sentiment swung back toward concern over global demand as the 50 basis point hike by the Reserve Bank of Australia focused investors’ minds about likely monetary policy tightening in the U.S., Europe and the U.K.

However, China’s travel restrictions are expected to increase oil demand over the next few weeks. The capital Beijing, and Shanghai, the commercial hub, will ease COVID-19 curbs, and allow more mobility. 

Saudi Arabia, the world’s largest crude exporter, showed sufficient confidence in future demand that earlier this week it raised July’s official selling price to Asia by $2.10 from June for its flagship Arab Light crude, just off an all-time peak recorded in May.

Even last week’s decision of the Organization of the Petroleum Exporting Countries and allies to boost output by 648,000 barrels a day for July and August, about 50% more than expected, has had little impact on the bullish sentiment.

“It is difficult to see a significant downside for the market in the coming months,” said analysts at ING, in a note. “The shunning of Russian oil will continue to tighten the balance, whilst very healthy refinery margins should provide further support to crude prices.”

will need to average $135 a barrel in the 12 months from July, up $10 from the bank’s previous forecast, for global inventories to normalize by late 2023, analysts at Goldman Sachs said, in a note, in the face of rebounding Chinese demand and reduced production from Russia.

Investors are now awaiting U.S. crude oil supply data at approximately 4:30 PM ET. 

Over 1,000,000 barrels of crude inventories were reduced last week. This trend is expected to continue as driving season in America, which is the world’s largest oil consumer, continues.