Oil prices rose slightly in volatile trading, as fears of tight supplies outweighed fears of slowing global demand due to a strong dollar and potentially large interest rate increases.
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Brent crude for November delivery rose 65 cents
Oil prices rose slightly in volatile trading on Monday, as fears of tight supplies outweighed fears of slowing global demand due to the strength of the US dollar and potentially large interest rate increases.
Brent crude for November delivery rose 65 cents, or 0.7%, to settle at $92 a barrel, while the price of US West Texas Intermediate crude for October delivery rose by 62 cents, or 0.7%, to $85.73 a barrel.
An internal document showed that the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, the bloc known as “OPEC +”, did not reach the target oil production of 3.583 million barrels per day in August. In July, “OPEC +” failed to achieve its target of 2.892 million barrels per day.
“Surveys regarding OPEC+ not meeting the August production target make the market feel that it is simply unable to ramp up production if the market demands it,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
The world’s central banks will almost certainly raise interest rates this week, and the Federal Reserve may raise rates by a percentage point.
The British public holiday due to the funeral of Queen Elizabeth limited trading volumes in London today.
Oil was also pressured by hopes that the European gas supply crisis would ease. German buyers booked capacity to receive Russian gas supplies through the Nord Stream 1 pipeline, but that was later reversed with no gas flowing.
Oil prices rose sharply in 2022, as Brent crude approached an all-time high of $147 in March following concerns regarding supplies were exacerbated by Russia’s war with Ukraine. Prices fell following that, amid fears of weak economic growth and weak demand.
And the dollar settled close to its highest level in 20 years, before the decisions expected this week by the Federal Reserve and other central banks. The rise of the dollar increases the cost of priced commodities to holders of other currencies and thus affects oil and other risk-sensitive commodities.
Oil also faced pressure due to expectations of lower demand, such as the International Energy Agency’s forecast last week that there will be no demand growth in the fourth quarter.
However, supply concerns limited the price drop.
“The entry into force of European sanctions on Russian oil is still hanging over the market. With supply disruptions in early December, it is likely that the market will not see any quick response from producers in the United States,” said analysts of “ANZ” Research. United”.
Analysts added that the easing of Covid-19 restrictions in China, which has pressured demand expectations in the world’s second largest energy consumer, might also give the market some optimism.