By Shariq Khan
NEW YORK (Reuters) -Oil prices edged higher on Tuesday after the U.S. government resumed buying oil for its strategic reserve, but the market was pressured by easing supply concerns and signs of weakening demand.
Brent crude futures rose 5 cents to $83.38 a barrel by 2:10 p.m. ET (1810 GMT). U.S. West Texas Intermediate futures rose 15 cents to $78.63 a barrel.
Earlier, prices were about 1% lower, but they recovered after the U.S. government launched a solicitation to buy more than 3 million barrels of oil for the Strategic Petroleum Reserve (SPR).
While the SPR purchase put a bid in the market, 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 rest of it does not matter,” Yawger said.
U.S. crude oil and product stockpiles were expected to have fallen last week, a Reuters poll showed. Crude inventories could have fallen by about 1.2 million barrels in the week to May 3, based on analyst forecasts. [EIA/S]
The American Petroleum Institute will post its weekly U.S. oil and fuel inventories data after 4:30 p.m. ET, and the U.S. Energy Information Administration’s weekly update on stockpiles is due on Wednesday.
Current inventory data shows crude oil and petroleum supplies are running 1.1 million barrel per day above forecasts in countries that are part of the Organisation For Economic Co-operation and Development, 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.
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.
“Crude traders seem to have developed a higher tolerance for geopolitical risk in the Middle East and its potential to disrupt global oil supply,” said Ricardo Evangelista, senior analyst at financial brokerage ActivTrades.
“Instead, their focus appears directed towards the uncertainties surrounding global economic growth prospects and the anticipated impact of sluggish growth on oil demand,” Evangelista added.
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.
(Reporting by Shariq KhanAdditional reporting by Alex Lawler, Deep Vakil, Andrew Hayley and Jeslyn LerhEditing by David Goodman, Mark Potter, Sharon Singleton and David Gregorio)
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