London, Oct. 3, 2023 – Oil prices stabilised on Tuesday after falling to a three-week low in the previous session on a stronger U.S. dollar, a darkening global macroeconomic outlook and mixed supply signals.
Brent futures crept up 2 cents to $90.73 a barrel by 1006 GMT, while U.S. West Texas Intermediate crude (WTI), edged 12 cents higher to $88.94 per barrel. Earlier in the session, prices fell by more than 1%.
“(Brent) crude oil prices slid to (around) $90 a barrel as rising US yields and a stronger US dollar dominated market sentiment,” ANZ analysts said in a client note.
“While supply remains tight, higher interest rates means expensive storage of inventories. This could lead to further destocking of oil inventories while increasing spot availability.”
The U.S. dollar on Monday rose to a 10-month high against a basket of major peers after the U.S. government avoided a partial shutdown and economic data fuelled expectations the Federal Reserve will keep rates higher for longer, which could slow economic growth.
Higher interest rates and a stronger dollar make oil more expensive for holders of other currencies, which could dampen oil demand.
Meanwhile, an announcement by Turkey’s energy minister that the country will restart operations this week on a pipeline from Iraq that has been suspended for about six months further weighed on prices.
“In theory, under the terms of the OPEC+ deal, production (outside the GCC) should remain flat over Q4. However, Iraq’s compliance has been somewhat spotty in the past and export levels should be expected to rise, assuming the pipeline resumes operations as planned,” BMI Research analysts said.
OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and other allies, is expected to keep its output unchanged when it meets on Wednesday, keeping supplies tight.
There could be an element of profit-taking ahead of the OPEC+ meeting after the strong rally since mid-August, or maybe economic fears are weighing, said Craig Erlam, OANDA analyst.
“The question now is whether…the recent shift in risk appetite will influence the outcome of the meeting.”
Saudi Arabia is likely to raise its November official selling price of Arab Light crude to Asia for the fifth straight month, according to a Reuters survey. (Reuters)
