Oil Up, Reverses Losses as Signs of Tightness in U.S. Crude Supplies Emerge

Oil was up Tuesday morning in Asia, reversing some losses from the week so far ahead of U.S. crude oil supply data.

Brent oil futures were up 0.54% to $74.46 by 11:40 PM ET (3:40 AM GMT) after falling almost 2% on Monday. WTI futures, which expire later in the day, rose 0.98% to $70.83 after sliding 2.3% during the previous session.

Global utilities are switching to fuel oil due to rising gas and coal prices, and lingering outages from the Gulf of Mexico after Hurricane Ada that imply less supply is available, according to ANZ.

Royal Dutch Shell (LON:RDSa) Plc, the biggest oil producer in the U.S. sector of the Gulf of Mexico, said that production from two of its largest fields in the region will not resume until 2022 thanks to the damage wrought by Hurrican Ida in late August 2021.

The disruption in production will impact about 300,000 barrels of daily output capacity, or one out of every six barrels pumped in the region, according to Bloomberg Intelligence.

Markets are now seeking alternative supplies, but a global energy crunch, particularly for natural gas, could increase demand for crude oil.

Crude oil supply data from the American Petroleum Institute is due later in the day.

In Asia Pacific, the economic recovery in China, the world’s top oil importer, is also on investors’ radars. The U.S. Federal Reserve will also hand down its latest policy decision on Wednesday and is widely expected to begin asset tapering.

“While slowing Chinese economic growth and uncertainty around the Fed’s tapering timetable weighed on market sentiment, other developments still point to higher oil prices,” ANZ Research analysts said in a note.