Brent crude against which Nigeria’s oil is benchmarked traded at $86.3 per barrel on Tuesday as investors took a breather after a rally sent the benchmark oil contract to three-year highs.
This is as the WTI crude futures dally between gains and losses at around $84 per barrel as markets await US inventory levels.
The US oil benchmark has been steadily rising since the fourth week of August to reach 7-year highs above $85 due to an extraordinary recovery in demand.
This is following the reopening of major economies and shortages of coal and natural gas ahead of the winter season, especially in China.
Concerns about demand from China weighed down on otherwise bullish market sentiment after government intervention cooled a surge in energy and coal prices.
Still, prospects for a colder-than-usual November month, coupled with OPEC+ countries’ strategy to keep supplies tight, have been pushing the market closer to a squeeze.
Investors will look to the US Energy Information Administration’s weekly report due for release later today to confirm the API data.
“Of particular interest will be the Cushing inventory numbers. A similar reading to the API would leave total Cushing stocks at below 30 million barrels. Such a scenario would likely continue to provide strength to WTI time spreads,” ING analysts Warren Patterson and Wenyu Yao said in a note.
Nonetheless, crude oil prices have posted gains for the past nine weeks, with the Relative Strength Index on a daily chart for the NYMEX contract showing oil prices sitting squarely in overbought territory.
Analysts have said that at current levels, oil prices were due for some profit-taking.