Futures in New York declined 0.2%, giving up earlier gains of as much as 0.8%. OPEC and its partners could quickly deploy their stalled production spare capacity to quash oil price rallies, the IEA said in its monthly report. Demand won’t return to pre-virus levels until 2023, the agency said in a separate report.
Traders will get more supply information Wednesday with the U.S. inventory data, which could show the first decline in crude stockpiles since mid-February. The Federal Reserve policy statement is also due later.
Despite the recent retreat, oil is still up more than 33% this year as OPEC+ output cuts tighten supply and as the demand outlook improves with the rollout of Covid-19 vaccines. Consumption is roaring back in some regions including the U.S., although parts of Europe are struggling. There’s also been some recovery in the dollar, curbing crude’s gains of late.
Oil “is clearly struggling to find direction after the IEA report and longer term forecast gave something to both the bull and bear camp,” said Ole Hansen, head of commodities strategy at Saxo Bank. “Global demand is being upgraded while U.S. supply growth is expected to remain subdued.”
See also: Traders Snap Up Europe’s Gasoline After U.S. Stockpiles Collapse
Attention is sharpening on the U.S. supply picture after the recent Texas freeze caused a serious of gyrations in the market. Earlier this week profit from making gasoline neared $25 a barrel following some of the biggest inventory draws on record. That’s pulled European supply to help fill the gap.
At the same time, crude inventories have been growing in recent weeks. It’s forced the prompt timespread for WTI into contango, a bearish market structure. U.S. producers have bounced back after the cold blast last month, although some refiners are yet to fully resume normal operations, leading to excess crude supplies.
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