Oil prices settled higher on Tuesday, recovering from the previous session’s five-month lows as investors reconsidered expectations of an impending supply glut and awaited clarity on the ongoing trade dispute between the United States and China, the world’s two largest oil consumers, Reuters reported.
Brent crude futures rose by 31 cents, or 0.5%, to close at $61.32 per barrel, while U.S. West Texas Intermediate (WTI) crude for November delivery, which expired at Tuesday’s settlement, climbed 30 cents, or 0.5%, to finish at $57.82 per barrel.
Both benchmarks had touched their lowest levels since early May on Monday, weighed down by record U.S. oil production and the decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to proceed with planned supply increases, which fueled concerns of oversupply.
However, relatively low U.S. crude and distillate fuel inventories helped limit further declines in prices, according to Bjarne Schieldrop, chief commodities analyst at SEB.
The trade tensions between Washington and Beijing have heightened fears of slower global economic growth, which could weaken oil demand. Despite this, both countries have made efforts to ease tensions.
U.S. President Donald Trump, who is scheduled to meet China’s President Xi Jinping in South Korea next week, said on Monday that he expects to reach a “fair trade deal” with his counterpart.
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Analysts remain divided on the direction of the oil market. Both WTI and Brent futures curves have begun shifting into a contango structure, where near-term prices are lower than those for later delivery, a signal of abundant supply and waning demand. Market participants are now debating how pronounced that contango could become.
Earlier this month, the International Energy Agency (IEA) projected that next year’s anticipated surplus could result in a steeply upward-sloping futures curve, known as a “super contango.”
However, that scenario has yet to materialize, UBS analyst Giovanni Staunovo noted in a recent report.
“While supply concerns have increased in recent weeks again, we believe the oil market is oversupplied but not in a glut,” Staunovo wrote.
“We expect oil prices to stabilize around current levels,” he added, cautioning that prices could face renewed pressure if trade tensions escalate.
A preliminary Reuters poll released on Monday indicated that U.S. crude oil inventories likely rose last week. “The reality of stock builds appears to be finally here and prices should head lower to put a deeper contango in the market,” said Scott Shelton, energy specialist at TP ICAP Group.
Meanwhile, Bloomberg reported on Tuesday that the U.S. government plans to purchase 1 million barrels of crude oil for its Strategic Petroleum Reserve.
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