Oil futures erased an early bounce to turn lower as the U.S. dollar resumed a push higher while investors weigh fears of a global economic downturn against tight crude supplies.
Price action
-
West Texas Intermediate crude for November delivery
CL.1,
+0.41% CL00,
-0.73%
was down 13 cents, or 0.2%, at $85.33 a barrel on the New York Mercantile Exchange. -
December Brent crude
BRN00,
+0.53% BRNZ22,
+0.53% ,
the global benchmark, ticked down 5 cents, or 0.1%, to $91.57 a barrel on ICE Futures Europe. -
Back on Nymex, November gasoline
RBX22,
+0.02%
fell 0.2% to $2.588 a gallon, while November heating oil
HOX22,
+1.31%
was up 0.4% at $4.101 a gallon. -
November natural gas
NGX22,
+0.73%
fell 0.6% to $5.964 per million British thermal units.
Market drivers
Crude prices rose in Asian trade Tuesday, but saw gains slip as the U.S. dollar resumed its push higher. The ICE U.S. Dollar Index
DXY,
a weighted measure of the greenback against a basket of six major currencies, was up 0.2%, trading around 2% below a 20-year high set at the end of last month. A stronger dollar can be a weight on commodities priced in the unit, making them more expensive to users of other currencies.
Crude has given back a large chunk of the gains scored in the first week of October when OPEC+ — made up of the Organization of the Petroleum Exporting Countries and allies including Russia — agreed to cut production by 2 million barrels a day beginning in November. The actual cut is expected to be around half that size since several producers were already pumping below their targets, but the move was still seen as significant.
Strong gains for U.S. equities and a weaker dollar on Monday failed to push oil prices higher, noted Warren Patterson, head of commodities strategy at ING, in a note.
“Instead, the market still seems wary of the demand outlook for the market. President Xi has made it clear that China will continue to follow a zero-COVID policy, which raises uncertainty over Chinese oil demand through 2023. Recession concerns elsewhere only add to the market’s uncertainty,” he wrote.
Bloomberg reported that the Biden administration is moving toward a release of another 10 million to 15 million barrels of oil from the Strategic Petroleum Reserve in an effort to keep gasoline prices from rising further. A release would be the latest tranche of a 180-million-barrel program of releases that began earlier this year.
