Oil steadies on strong US dollar, darkening global macroeconomic outlook

Oil prices stabilized on Tuesday after falling to a three-week low in the previous session, thanks to a stronger US dollar, a gloomy global macroeconomic outlook and mixed supply signals.

Brent futures rose 2 cents to $90.73 a barrel by 1006 GMT, while US West Texas Intermediate crude (WTI) rose 12 cents to $88.94 a barrel. Earlier in the session, prices fell by more than 1%.

“(Brent) crude oil prices fell to (around) $90 per 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 mean expensive stockpiling. This could lead to a further reduction in oil inventories, while spot market availability increases.”

The U.S. dollar rose to a 10-month high against a basket of major peers on Monday after the U.S. government avoided a partial shutdown and economic data fueled expectations that the Federal Reserve will keep interest rates high for longer, boosting economic growth could slow down.

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 this week will suspend operations on a pipeline from Iraq, which has been suspended for about six months, further weighed on prices.

“In theory, production (outside the GCC) should remain stable in the fourth quarter under the terms of the OPEC+ deal. However, Iraq has failed to comply with the rules in the past and export levels are expected to rise, assuming the pipeline becomes operational again. planned,” said analysts at BMI Research.

OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and other allies are expected to keep output unchanged at their meeting 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 perhaps economic fears are weighing in, says 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 increase its official selling price of Arab light crude to Asia for the fifth straight month in November, according to a Reuters survey.