International Demand

Oil prices drop slightly, still near highs due to limited supply

Crude oil storage tanks are seen from above at the Cushing Oil Hub in Cushing, Oklahoma on March 24, 2016. REUTERS / Nick Oxford

TOKYO, Oct.26 (Reuters) – Oil prices edged down on Tuesday but remained near multi-year highs, supported by a global supply shortage and strong demand in the United States, the world’s largest consumer.

Brent crude was down 55 cents, or 0.6%, at $ 85.44 a barrel at 0922 GMT. US oil fell 56 cents, or 0.7%, to $ 83.20.

“There was no specific reason for the price drop … The fact that the market remains tight should push prices up,” said Carsten Fritsch, analyst at Commerzbank.

Goldman Sachs said Brent was likely to exceed its year-end forecast by $ 90 a barrel, while Larry Fink, managing director of the world’s largest asset manager BlackRock, said there was a strong probability of oil reaching $ 100. Read more

While China’s electricity and coal markets have cooled somewhat after government intervention, energy prices remain high around the world as temperatures drop with the onset of the northern winter. Read more

“The forecast for a colder November sees energy traders bracing for a very tight market that will be met (with) unprecedented demand this winter,” said Edward Moya, senior market analysts at OANDA, in a note.

“This oil market will remain tight and that should mean a headline or two away from $ 90 oil.”

US gasoline and distillate consumption is back to five-year averages after more than a year of depressed demand, and the market will closely monitor US inventory levels. Read more

Crude oil inventories are expected to have risen by 1.7 million barrels last week, while gasoline and distillate inventories are expected to decline, according to a Reuters poll of analysts.

Avtar Sandu, senior director of commodities at Phillip Futures in Singapore, said traders were also awaiting clarification on the outcome of international talks to revive the 2015 Iran nuclear deal, after the United States said that the efforts were in a “crucial phase” that could reopen the way for Iranian crude exports. Read more

Reporting by Aaron Sheldrick; Editing by Robert Birsel and John Stonestreet

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