Oil prices extended gains in Asia Tuesday but the uptick was capped as investors waited for data on US crude stockpiles expected to further underscore a global supply glut.
Prices pushed higher on Monday after US-led coalition jets bombed the Islamic State group’s oil operations following the deadly attacks on Paris, but analysts said the impact of geopolitical tensions on the oil market is limited.
At around 0300 GMT, US benchmark West Texas Intermediate (WTI) for delivery in December was up six cents to $41.80 and Brent crude for January was trading 11 cents higher at $44.67 a barrel.
The gains on WTI “are really an exercise to defend the $40 handle, where we saw a 4.0 percent rebound after prices touched lows of $40.06,” said Bernard Aw, market strategist at IG Markets in Singapore.
“It’s difficult to see more upside potential, although we might be getting closer to the equilibrium price level where we meet the sweet spot in the supply and demand equation,” he told AFP.
He said investors are also cautious ahead of a US Department of Energy report Wednesday on commercial crude stockpiles in the week ending November 13.
Analysts expect another build in the inventories, which would indicate weaker demand in the world’s top oil consuming nation.
BMI Research said the geopolitical tensions sparked by the escalation of military action against IS following the Paris attacks is unlikely to be a major influence on oil prices.
It pointed out in a commentary that the global market remains oversupplied, crude inventories in developed countries are at record levels and there is no direct threat to Middle East oil facilities and transit points.
“There is no material threat to the oil-producing facilities and transit routes in the Middle East from the escalation of the French military effort in Syria,” it said.
“Namely, this refers to the oil facilities of Saudi Arabia, the Gulf states, southern Iraq and the Kurdistan Regional Government (KRG), as well as the strategic chokepoints of Suez Canal, Bab el-Mandab and the Straits of Hormuz, all of which remain out of reach of military campaigns.”