Oil settles lower on signs of easing supply tightness

NEW YORK, May 7 (Reuters) – Oil prices closed slightly lower on Tuesday on signs of easing supply concerns, while market participants shifted their focus to U.S. stockpiles data due later today and Wednesday.

Brent crude futures settled 17 cents lower at $83.16 a barrel, and U.S. West Texas Intermediate crude futures closed 10 cents lower at $78.38.

The U.S. Energy Information Administration on Tuesday raised its forecasts for this year’s world oil and liquid fuels output and lowered its demand expectations, pointing to a well-supplied market as opposed to prior forecasts that showed under-supply.

The premium of the first-month Brent contract to the six-month contract slipped to $2.90 a barrel on Tuesday, the lowest since mid-February, another sign of market participants betting on easing supply tightness.

Current inventory data shows crude oil and petroleum supplies are running 1.1 million barrel per day above forecasts in developed economies, according to an analysis by energy brokerage StoneX.

“Global inventories remain in a building phase and has accelerated recently,” StoneX analyst Alex Hodes wrote to clients on Tuesday.

Last week, Brent and WTI had their steepest weekly losses in three months as weak U.S. jobs data fueled hopes for interest rate cuts.

Oil prices found some support on Tuesday from a U.S. government solicitation to buy more than 3 million barrels of oil for the Strategic Petroleum Reserve (SPR), but the focus remained on U.S. oil storage reports due on Tuesday and Wednesday, Mizuho analyst Robert Yawger said.

“We need to see refiners running more barrels heading into peak summer driving season. If the inventories data goes in the wrong direction, the SPR and the rest of it does not matter,” Yawger said.

U.S. crude oil inventories could have fallen by about 1.2 million barrels in the week to May 3, according to a Reuters poll of analysts.

The American Petroleum Institute will post its weekly U.S. oil and fuel inventories data after 4:30 p.m. ET (2030 GMT), and the U.S. Energy Information Administration’s weekly update on stockpiles is due on Wednesday.

Oil traders largely looked past escalating tensions in the Middle East, where the Israeli military seized control of the Rafah border crossing between the Gaza Strip and Egypt and its tanks pushed into the southern Gazan town of Rafah, as mediators struggled to secure a ceasefire agreement.

“Instead, their focus appears directed towards the uncertainties surrounding global economic growth prospects and the anticipated impact of sluggish growth on oil demand,” said Ricardo Evangelista, senior analyst at financial brokerage ActivTrades.

Source: Reuters.com

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