By Scott DiSavino
NEW YORK (Reuters) – Oil prices edged up on Tuesday as the U.S. lifting of travel restrictions and more signs of a global post-pandemic recovery boosted the demand outlook, while supply remained tight.
The rally came ahead of the U.S. Energy Information Administration’s (EIA) release of oil and gasoline price predictions in its Short Term Energy Outlook (STEO), which U.S. President Joe Biden’s administration has said it would use to determine whether to release oil from the nation’s Strategic Petroleum Reserve (SPR).
Brent futures rose 61 cents, or 0.7%, to $84.04 a barrel by 11:16 a.m. EST (1616 GMT), while U.S. West Texas Intermediate (WTI) crude rose $1.04, or 1.3%, to $82.97.
That puts both Brent and WTI on track for their highest closes since Nov. 2.
The price of Brent has gained over 60% this year and hit a three-year high of $86.70 on Oct. 25, supported by recovering demand and supply restraint by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+.
“The (Biden) administration has said they will use data from (EIA’s STEO) report to decide what to do about high energy prices that they blame on OPEC+,” said Bob Yawger, director of energy futures at Mizuho in New York.
OPEC+ added 400,000 barrels per day (bpd) of crude oil to global supply at last week’s OPEC+ meeting. President Biden wanted them to add more. OPEC+ is scheduled to add 400,000 bpd a month through June 2022, Yawger said.
In its October STEO report, EIA projected WTI would average $68.48 per barrel in 2021 and $68.24 in 2022, while retail regular grade gasoline would average $2.97 per gallon in 2021 and $2.90 in 2022.
Global oil spare production capacity could diminish next year as air passengers return to the skies, removing an important cushion that the market is currently enjoying, Saudi Aramco Chief Executive Amin Nasser said.
Travelers took off for the United States again, while the passage of Biden’s $1 trillion infrastructure bill and better-than-expected Chinese exports helped paint a picture of a recovering global economy.
“With the re-opening of U.S. borders for vaccinated travelers, jet fuel demand ought to receive a healthy … boost,” said Tamas Varga of oil broker PVM.
JPMorgan Chase said global demand for oil in November was already nearly back to pre-pandemic levels of 100 million bpd, following last year’s collapse.
Despite a tight global market, analysts forecast that U.S. crude inventories rose for a third straight week, possibly helping to cap further gains in prices. [EIA/S]
The first of this week’s two supply reports, from industry group the American Petroleum Institute, is due later Tuesday.
Another factor weighing on crude was a drop in wholesale natural gas prices in Europe on Tuesday after Russian gas flows resumed to Germany.
France’s foreign minister, meanwhile, told his Iranian counterpart on Tuesday that when talks with world powers on reviving a nuclear accord resume at the end of November, they must continue where they left off in June.
Success in those talks would allow Iran to boost oil exports.
(Additional reporting by Alex Lawler in London and Aaron Sheldrick in Tokyo; Editing by Kirsten Donovan, Mark Potter and Steve Orlofsky)
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