Oil prices rose on Tuesday in anticipation of tighter supply later in February while markets watched U.S. diplomatic efforts to end the Gaza War and quell tensions in a major crude-producing region.
Brent crude futures gained 87 cents, or 1.12%, to $78.86 a barrel by 10:49 a.m. CST while U.S. West Texas Intermediate crude futures rose 88 cents, or 1.21%, to $73.68. Both contracts gained nearly 1% on Monday, rising for the first time in four sessions.
Inventory data due to be released later on Tuesday and on Wednesday are expected to show continued strong inventories for gasoline and diesel, said Phil Flynn, analyst at Price Futures Group. But going forward, those inventories are expected to tighten, he said.
Refiners are performing overhauls on plants across the country and an outage last week of the BP refinery in Whiting, Indiana, will limit production.
Efforts by U.S. Secretary of State Antony Blinken to halt the Gaza war were also on traders’ minds.
“The signs of de-escalation in the Middle-Eastern crisis are missing and continue to extend some support to ailing oil prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Blinken on Tuesday landed in Cairo for a meeting with Egyptian President Abdel Fatah al-Sisi. Palestinians hope the visit will bring a truce before a threatened Israeli assault on Rafah, a border city where about half the Gaza Strip population is sheltering.
At the same time, the United States continued its campaign against Iran-backed Houthis in Yemen, whose attacks on shipping vessels have disrupted global oil trading routes.
The U.S. strikes “do not point to an easing of tensions”, Commerzbank analysts Thu Lan Nguyen and Carsten Fritsch said in a note.
Yet souring demand expectations limited oil’s gains.
Analysts said expectations of higher-for-longer interest rates in the U.S. and elsewhere, plus China’s shaky economy, could cap consumption.
CMC Markets analyst Leon Li also said it would be difficult to return to previous highs, given the run of strong economic indicators from the U.S. was likely to lose steam.
“Layoffs are still increasing. This means that in the long term the (oil) demand will decline,” Li said.
On the supply side, market participants are awaiting U.S. crude stockpiles data due later on Tuesday. Five analysts polled by Reuters estimated on average that crude inventories rose by about 2.1 million barrels in the week to Feb. 2.
Source: Reuters (Reporting by Paul Carsten in London and Stephanie Kelly and Trixie Yap Editing by Louise Heavens, Jason Neely, David Goodman and David Ljunggren)