By Barani Krishnan
Investing.com - Oil prices were little changed on Tuesday on expectations that U.S. crude stockpiles saw another sizable draw last week amid concerns about the future demand for energy from the evolving new wave of the coronavirus.
New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled down a penny at $40.62 per barrel.
London-traded Brent, the global benchmark for oil, slid 2 cents to settle at $43.08.
A consensus of analysts tracked by Investing.com forecast that U.S. crude stockpiles likely fell by 3.1 million barrels last week, adding to the previous week’s drawdown of 7.2 million barrels.
Analysts said the previous week’s decline could have been a result of a ramp-up in crude processing to meet the gasoline demand anticipated from the spike in road travel from the 4th of July holiday weekend.
But last week’s inventory drop was likely caused by the ongoing theme of Saudi export cuts as the OPEC heavyweight tries to limit the crude it sends to the U.S. market in order to keep WTI prices propped up.
“There’s definitely less Saudi crude landing on U.S. shores these days,” said John Kilduff, founding partner at New York energy hedge fund Again Capital.
“That aside, U.S. crude exports have been picking up too as they’ve become more competitive to the Arab Light, which has seen three price increases lately due, again, to Saudi maneuvers in trying to keep crude prices broadly supported. These higher U.S. exports are helping draw down local inventories.”
The American Petroleum Institute will release at 4:30 PM ET (20:30 GMT) on Wednesday a snapshot of inventory expectations for last week, ahead of GThursday’s official data from the U.S. Energy Information Administration.
Separately, the EIA said in its Short Term Energy Outlook for July that WTI was expected to trade below $50 per barrel on the average through 2021 — or at least 20% below where they began this year, due to challenges posed by the coronavirus pandemic.
“Reduced economic activity related to the COVID-19 pandemic has caused changes in energy supply and demand patterns in 2020,” the EIA said, adding that “uncertainties persist across the … outlook for all energy sources, including liquid fuels, natural gas, electricity, coal, and renewables.”
The United States has been reporting some 40,000 new cases of coronavirus daily. Top U.S. pandemics expert Anthony Fauci said recently this could grow to 100,000 daily without proper social-distancing and other safety measures.
Data shows that some 3 million Americans have already been infected by the COVID-19, with a death toll exceeding 133,000. A new model by the University of Washington also predicts 200,000 coronavirus deaths in the United States by Oct. 1, casting further doubts on economic reopening from lockdowns.