Oil prices turned negative on Tuesday after new data from the U.S. Labor Department showed inflation cooling and the impact of tropical storm Nicholas on the energy sector began to improve.
Brent crude fell 38 cents, or 0.5pc, at $73.13 a barrel by 1:10 p.m. EDT (1719 GMT) after hitting a session high of $74.28. U.S. West Texas Intermediate (WTI) crude fell 41 cents, or 0.6pc, to $70.04 after touching a high of $71.22.
The U.S. consumer price index edged up 0.5pc from last year and 0.3pc from July, indicating slower growth than in prior months.
"Commodities are an important part of the inflation story, and we're seeing several commodities fall on this data," said John Kilduff, partner at Again Capital LLC in New York.
While Nicholas is the second major storm to threaten the U.S. Gulf region in recent weeks, bringing heavy rains to the Deep South and causing power outages, most Texas refineries are operating normally and the number of people in Texas without electricity is falling.
The Colonial pipeline, the nation's largest fuel pipeline, partially resumed operations after shutting earlier on Tuesday due to a power outage.
Oil hits 6-week high as Storm Nicholas hits US Gulf
Royal Dutch Shell on Tuesday shut production at an offshore oil platform due to heavy winds from Nicholas. Vessel traffic at some energy hubs was halted due to difficult weather conditions.
"There's going to be import-export issues because Houston is in a semi-flood zone," said Bob Yawger, director of energy futures at Mizuho.
After three months of declining global oil demand, rollouts of COVID-19 vaccines should rekindle appetite for oil that was suppressed by pandemic restrictions, especially in Asia, the International Energy Agency (IEA) said on Tuesday.
The IEA sees a demand rebound of 1.6 million barrels per day (bpd) in October and continued growth until the end of the year.
Overall, the agency lowered its 2021 global oil demand growth forecast by 105,000 bpd to 5.2 million bpd but raised its 2022 figure by 85,000 bpd to 3.2 million bpd.
These forecasts are below those of the Organization of the Petroleum Exporting Countries (OPEC), which expects demand to grow by about 5.96 million bpd this year and 4.15 million bpd next year.
Protesters blocked an oil tanker from loading at the Libyan terminal of Es Sider on Tuesday, the National Oil Corporation's (NOC) media office and an engineer at the Port said.
Details on China's plans to sell crude from its strategic reserves dampened price gains. China's state reserves administration said it would auction about 7.4 million barrels of crude on Sept. 24, the first batch of sales in a rare release of strategic inventories.
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