(Bloomberg) — Oil gained as traders focused on tightening supplies, with U.S. crude stockpiles forecast to decline for a seventh straight week.
West Texas Intermediate crude rose as much as 2.4% on Tuesday. Analysts surveyed by Bloomberg estimate a crude stockpile decrease of 1.7 million barrels for last week, while the industry-funded American Petroleum Institute will release its report on inventories later Tuesday.
“Storage has been down for weeks on end and as long as that continues, the market is going to continue to bid,”said Bob Yawger, director of the futures division at Mizuho Securities USA. “If stockpiles post a big draw, then we will be at the lowest level since 2018,” which would justify WTI trading between $75 and $85 a barrel, he added.
Oil has made a positive start to 2022 on expectations that demand will continue to expand as the pandemic’s impact on fuel consumption gradually eases, tightening the market. In the past few weeks, crude supplies from OPEC+ member nations Kazakhstan and Libya have been disrupted.
Still, prices face headwinds from the omicron variant as cities worldwide consider tighter restrictions to curb the spread of the highly transmissible virus. In China, the largest crude importer, authorities have locked down a city of 5 million people, a day after detecting omicron in Henan province.
The U.S. Energy Information Administration is set to publish its monthly oil-market outlook at 12 p.m. in Washington on Tuesday.
Meanwhile, diesel markets in Europe and the U.S. are currently among the strongest oil-product sectors. Profits from turning crude into the fuel are at their highest since October in both regions as winter demand picks up, remaining relatively robust in the face of the omicron virus variant.
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