Oil prices reversed course on Tuesday, paring gains from earlier in the day in what some analysts described as a short-term pullback from multi-year highs as the global energy crunch continues.
Oil prices held close to the multi-year highs reached early on Monday, when WTI Crude hit the highest level since October 2014 at $83.73 and the international benchmark briefly jumped above $86 per barrel at $86.04, which was the highest price since October 2018.
Oil weakened later on Monday and this weakness continued into Tuesday.
“A fall in US industrial production in September would have not helped sentiment, along with weaker GDP numbers from China,” ING strategists Warren Patterson and Wenyu Yao said on Tuesday.
On Monday, bearish Chinese data capped price gains—China recorded in September its lowest daily refinery throughput in 16 months amid a power crunch and feedstock shortage, as well as lower-than-expected economic growth in the third quarter.
In the U.S., data late on Monday showed that manufacturing output dropped by 0.7 percent in September, for the largest decline since February, “as shortages of semiconductors continued to hobble operations,” the Fed said.
“New disappointing US key figures on industrial production offered some concerns about the scale of the global demand recovery, an essential topic on the oil market right now. Early Tuesday, we see the market drifting more or less sideways,” Energi Danmark analysts said in a daily note on Tuesday.
Concerns about demand slowdown amid high fuel prices may have also returned.
“Sorry, folks, but the cost of gasoline is still going up,” AAA said on Monday, noting that higher crude oil prices continue to push gasoline prices higher.
“And unfortunately, it doesn’t look like drivers will be finding relief at the pump any time soon,” AAA spokesperson Andrew Gross said.
The “momentary lapse of confidence” on the oil market wasn’t surprising but it will likely be brief, broker PVM Oil Associates said on Tuesday.
“This retracement, however, ought to be just like previous ones – brief. After all, the break above the $80/bbl was triggered by both supply and demand considerations and the underlying picture has not changed,” the broker said.
By Tsvetana Paraskova for Oilprice.com
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