Meanwhile, another U.S. stockpile decline is expected: File Image/PixaBay
Receding fears of supply disruption from Saudi Arabia after a botched weekend attack on its facilities plus a stronger U.S. dollar contributed to a choppy trading day for oil on Tuesday, with the commodity falling to around $68 per barrel; but analysts suggest a correction was perhaps inevitable.
Brent settled down 72 cents, or 1.06 percent, at $67.52 per barrel, while West Texas Intermediate fell $1.04, or 1.6 percent, to settle at $64.01 per barrel.
Given that Brent hit $71.38 on Monday, the highest since Jan. 8, 2020, Phil Flynn, senior market analyst at Price Futures Group Inc., said oil has "had an incredible run, and it's due for a correction."
Phil Flynn, senior market analyst, Price Futures Group Inc.
The market seems to be softening
He added that "There's an expectation that we're going to see another increase in U.S. crude supplies because refineries remain shut down," and that "the market seems to be softening on those concerns."
Bjornar Tonhaugen, head of oil markets at Rystad Energy, noted that "Caution is advised as prices are, of course, not going to rise forever; a more definite price direction is expected soon, when the U.S. weekly oil inventory reports" are released–a reference to the latest round of reports that, contrary to some predictions, are expected to show a decline in stockpiles.
For his part, John Kemp, commodities analyst for Reuters, wrote on Tuesday that U.S. shale producers vowing to pursue a more restrictive approach to capital investment and production "seem to have emboldened Saudi Arabia and its allies in OPEC+ [the Organization of the Petroleum Exporting Countries] to test the room for higher oil prices."
Kemp went on to theorize that the interest in testing support for higher prices comes when many investors are expecting a strong upward cycle, or even supercycle, in oil and other commodity prices–and if prices spike over the next few years, "governments are likely to respond by mandating faster deployment of electric vehicles and other oil conservation measures, ensuring consumption losses are permanent."
Meanwhile, the current higher prices have prompted Abu Dhabi National Oil Company (ADNOC) to seek new partnerships in carbon capture technology.
Sultan Al Jaber, managing director and group CEO at ADNOC, said oil demand would rise above pre-Covid levels by the end of the year and that "There is no credible way of reaching global climate goals without seriously advancing and ensuring the widespread adoption of carbon capture and storage."
ADNOC recently partnered with Total to explore opportunities in CO2 emission reductions and CCS, and Al Jaber said "We are very ready to partner with others within and even outside our industry to enable wider CCS adoption."