“Petroleum prices are under selling pressure as part of a wider risk-off trade flow across a wider range of commodities as the USA dollar index has extended its recent rally”, said Tim Evans, energy futures specialist at Citi Futures in NY.
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U.S. West Texas Intermediate crude futures were up 25 cents, or 0.5 percent, at $46.46 a barrel.
Crude futures have rallied for most of the past two weeks from a combination of Nigerian, Venezuelan and other outages, declining US production and virtually frozen inflows of Canadian crude after wildfires in Alberta’s oil sands region.
The oil price had plunged close to $27 in January – its lowest level since 2003 – amid a glut of crude supply amid weak demand.
Brent for July settlement added as much as 50 cents, or 1 per cent, to US$49.47 a barrel on the London-based ICE Futures Europe exchange yesterday, after rising 2.4 per cent on Monday.
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A new report from Goldman Sachs also notes that stronger demand from India, China and Russian Federation has helped support prices. “As these issues linger, we expect an increasing supply risk premium will price into the market”, the bank said.
The report by Goldman Sachs and other investment firms such as Morgan Stanley also seems to indicate that demand for oil would increase at a greater pace next year and and could help stabilize prices between $50 and $60 a barrel.
Oil Futures continued to advance early Tuesday amid concern over the impact week-long wildfires in Canada have had on that country’s output as well as security fears in producers Nigeria, Libya and the Middle East.
Political instability in Nigeria, wildfires in Canada, liquidity issues with Venezuela, a falling Chinese economy, and declining U.S. shale production have all contributed to thinning supply.
Goldman Sachs, which has been bearish on oil for a while, has now upgraded its forecast for the commodity.
In Nigeria, militant activity in the oil-rich Niger Delta has driven the country’s crude oil output to more than 22-year lows of less than 1.4 million barrels per day.
USA energy inventory data released Wednesday may show that crude stockpiles in the world’s biggest economy have dropped for a second week running because of reduced exports from across the Canadian border.
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In Canada, production has also been cut as wildfires forced closures of around 1 million barrels in daily production, although output is gradually returning.
