Oil slipped on Tuesday, staying close to a seven-year high hit last week, weighed by expectations of a rise in U.S. inventories, although the prospect of a limited production hike by OPEC+ countries and solid demand growth lent support.
The wider rally was expected to persist, however. The Organization of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, is undershooting its monthly output increases and is expected to keep its policy of gradual hikes in place at a meeting on Wednesday. [OPEC/O]
"Demand is expected to keep on climbing," said Naeem Aslam of Avatrade. "Moreover, major oil-producing nations are also likely to stick with their current strategy. Hence, crude oil prices are likely to have only one way to go, and that is up."
Brent crude was down 28 cents, or 0.3%, at $88.98 a barrel at 0920 GMT. U.S. West Texas Intermediate crude slipped 18 cents, or 0.2%, to $87.97.
Oil was pressured on Tuesday by expectations that this week's U.S. supply reports will show an increase in crude stockpiles. Analysts expect crude stocks to have risen by 1.8 million barrels.
The first of this week's two supply reports, from the American Petroleum Institute, is out at 2130 GMT. [EIA/S]
Brent and U.S. crude hit their highest levels since October 2014 on Friday, at $91.70 and $88.84 respectively. They gained about 17% in January amid a supply shortage and tensions between Russia and the West over Ukraine, and in the Middle East.
"The oil market is currently unreservedly bullish," said Tamas Varga of oil broker PVM. "It is international tension, the perception of tight supply and the cold winter that are the most important factors behind the strength."
Rising differentials in the physical crude market imply concern about tight supply, Varga said. One of the North Sea crudes that underpin Brent, Ekofisk, was bid on Monday at the highest in over a decade.(source)
