Oil slipped on Tuesday, staying close to a seven-year high, weighed by speculation OPEC+ could go further than expected to add supply at a meeting this week and expectations of a rise in US inventories.
While the Organisation of the Petroleum Exporting Countries and allies, known as OPEC+, has been expected to maintain its policy of gradual production hikes at a meeting on Wednesday, Goldman Sachs said there was a chance of further steps.
“We view growing potential for a faster ramp-up at this meeting, given the pace of the recent rally and the likely pressure from importing nations,” the bank said in a January 31 report, adding the outcome remained “evenly balanced” between an accelerated response and a status quo increase.
Brent crude was down $0.51, or 0.6%, at $88.75 a barrel at 1238 GMT. US West Texas Intermediate crude slipped $0.63, or 0.7%, to $87.52.
Oil was also pressured by expectations this week’s US 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.
Brent and US 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.
OPEC undershot its promised output boost in January, a Reuters survey found, and the rally was still expected by other analysts to persist.
“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 underpins Brent, Ekofisk, was bid on Monday at the highest in over a decade. REUTERS