By Arunima Kumar and Emily Chow
(Reuters) -Oil prices inched up on Tuesday after tumbling 6% in the previous session, as a U.S. plan to buy oil for the Strategic Petroleum Reserve (SPR) provided some support though wider concerns about weaker future demand growth exerted pressure.
Brent crude futures climbed 63 cents, or 0.88% to $72.05 a barrel by 0847 GMT, while U.S. West Texas Intermediate crude was 58 cents, or 0.86%, higher at $67.37 a barrel.
On Monday, both contracts fell to their lowest since Oct. 1 after Israel’s retaliatory strike on Iran at the weekend bypassed Tehran’s oil infrastructure.
With signs that neither country seemed likely to escalate the conflict after the attack, investor concerns about flagging global oil demand growth for this year and next rose to the fore.
“Unless there is another Iranian counter to the counterattack – recurring – the run up to the U.S. vote next week will likely see Israel limit its operations to proxies rather than Iran itself,” said John Evans, an analyst at oil broker PVM.
Still, tensions in the Middle East remain high. Iranian Foreign Ministry spokesperson Esmaeil Baghaei said on Monday that Iran will “use all available tools” to respond to Israel’s weekend attack.
The U.S. warned Iran at the United Nations Security Council of “severe consequences” if it undertakes any further aggressive acts against Israel or U.S. personnel in the Middle East.
The U.S. on Monday said it was seeking up to 3 million barrels of oil for the SPR for delivery through May next year, a purchase that would leave the government with little money to buy more until lawmakers approve more funds.
The U.S. announcement introduces a fundamental buyer into a category which at present has been sparsely populated, PVM’s Evans said.
However, Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan (OTC:NSANY) Securities, predicted a downward trend ahead as peak winter kerosene demand season in the Northern Hemisphere was still some way off while demand in China remained sluggish.
Crude oil and gasoline stockpiles in the U.S. likely rose last week, while distillate inventories were seen down, a preliminary Reuters poll showed on Monday.
The American Petroleum Institute industry group is scheduled to release a weekly report on Tuesday and the Energy Information Administration, the statistical arm of the U.S. Department of Energy, will issue one on Wednesday. [EIA/S] [API/S]
This post is originally published on INVESTING.
