Melbourne — Oil prices fell on Tuesday as optimism for a straightforward recovery in fuel demand faded and a looming increase in supply weighed on the market, with Libya’s state oil company flagging progress on talks to resume exports.
US West Texas Intermediate (WTI) crude futures fell as much as 44c, but recovered slightly after stronger-than-expected Chinese factory data. By 2am GMT they were trading down 26c, or 0.7%, at $39.44 a barrel, having jumped 3% on Monday.
Brent crude futures for September fell 17c, or 0.2%, to $41.68 a barrel, paring Monday’s 92c gain. The less active August contract, which expires on Tuesday, fell 25c after gaining 69c on Monday.
Optimism on Monday had been based on strong growth in US pending home sales, bolstering belief that global fuel demand is rising steadily as economies reopen after coronavirus lockdowns. But at the same time, coronavirus cases continue to rise in southern and southwestern US states.
“It’s really difficult to say that demand is a one-way street. There are still plenty of risks going both ways,” said Vivek Dhar, mining and energy commodities analyst at Commonwealth Bank of Australia.
Bulls will be looking for more signs of a demand recovery in data due on Tuesday from the American Petroleum Institute industry group and from the US government on Wednesday.
A preliminary Reuters poll showed analysts expect US. crude oil stockpiles fell from record highs last week and fuel inventories decreased for a third straight week.
On the supply side, investors are watching to see whether Libya, which can produce about 1% of global oil supply, is able to resume exports, blockaded since January amid a civil war.
Libya’s National Oil Corp (NOC) said on Monday it was making progress on talks with neighbouring countries to lift the blockade.