Oil was up Tuesday morning in Asia but eased after a five-day rally. Investors took profits as fears that higher prices that could weaken fuel demand increased, even as market sentiment remained firm amid a tight supply globally.
"Oil markets took a breather after a long rally, with some investors scooping up profits," Fujitomi Securities Co Ltd analyst Toshitaka Tazawa told Reuters, amid concerns that surging oil prices may reduce fuel demand.
"Still, the market sentiment remained strong with tighter supply," he added predicting that Brent futures could try a key $80 a barrel soon. Goldman Sachs Group Inc. (NYSE:GS) also raised its year-end forecast for Brent futures by $10 to $90 per barrel, which also boosted investor sentiment.
Meanwhile, several members of the Organization of the Petroleum Exporting Countries are struggling to meet their increased quota levels, with top African oil exporters Nigeria and Angola warning that they will do so until at least 2022.
Global supplies remain tight as fuel demand continues to recover from the latest COVID-19 outbreaks and Hurricane Ida disrupted production in the U.S. Gulf of Mexico region in late August 2021.
Investors now await U.S. crude oil supply data from the American Petroleum Institute, due later in the day.
Some investors also suggested that rising spot liquefied natural gas (LNG) and coal prices could also give the black liquid a boost.
"Oil demand could pick up by an additional 0.5 million barrels per day, or 0.5% of global oil supply, as high gas prices force a switch from gas to oil consumption," Commonwealth Bank commodities analyst Vivek Dhar said in a note.
"That is set to tighten oil markets further, especially with supply additions from OPEC+ remaining quite conservative," and energy prices could still rally from here if the winter period in the northern hemisphere proved colder than expected, the note added.