Crude Oil Rises as Supply Worries Outweigh Pressures
By Adedapo Adesanya
The crude oil market improved on Tuesday as the system latched onto tightening crude supply amid pressures from a stronger US Dollar and worrying global economic signals, with Brent gaining 21 cents to trade at $90.92 per barrel and the US West Texas Intermediate (WTI) increasing by 41 cents to $89.23 per barrel.
Prices have faced pressure as the US Dollar rose to a 10-month high against a basket of major peers after US job openings data pointed to a still-tight employment market that could prompt the US Federal Reserve to raise interest rates next month.
Higher interest rates and a stronger dollar make oil more expensive for holders of other currencies, which could dampen oil demand.
Investors kept an eye on any supply updates following last month’s decision by Saudi Arabia and Russia to extend output cuts to the end of the year.
The two countries belong to the Organization of the Petroleum Exporting Countries and allies, OPEC+, and have kept prices up with a series of production cuts.
The producer group will meet on Wednesday and there are expectations they will keep output policy unchanged, keeping supplies tight.
Prices rose about 30 per cent in the third quarter as OPEC+ production cuts squeezed global crude supply.
Furthermore, Russia’s sustained ban on fuel exports due to the instability in its domestic market accentuates the tightening grip on global supply, with implications for price movements in the short and medium term.
Reuters reported that Saudi Arabia is expected to raise its November official selling price of Arab Light crude to Asia for a fifth straight month.
According to Russian Prime Minister, Mr Alexander Novak, the country has set no time frame for the fuel export ban it introduced last month. This means it will remain in place as long as necessary to stabilize prices and address shortages in the domestic market.
Meanwhile, talks to restart Iraqi oil exports via a crude oil pipeline that runs through Turkey are still ongoing. This is after a day Turkey said operations would restart this week after nearly a six-month stoppage.
Analysts said under the terms of the OPEC+ deal, production (outside the Gulf Cooperation Council), Iran supply should remain flat over the 4th quarter. However, the country’s compliance has been somewhat spotty in the past and export levels should be expected to rise.
Iraq, OPEC’s second-biggest producer, also said it would award 30 new oil and gas projects in its fifth and sixth licensing rounds.
The American Petroleum Institute (API) reported a large draw of 4.210 million barrels in US crude inventories, compared to last week’s 1.586-million-barrel build.
Analysts were expecting a modest inventory draw of 92,000 barrels for the week. The total number of barrels of crude oil moves so far this year is 9 million, according to API data.
The official government data on stockpiles from the Energy Information Administration (EIA) is due on Wednesday.