Oil futures were flat to slightly higher in early trade on Tuesday, stabilizing after a three-session decline that brought crude prices to their lowest point in roughly three weeks. Despite the pullback, oil remains near its peak for 2023, driven by concerns about tightening supplies.
West Texas Intermediate rises, Brent crude holds steady
- West Texas Intermediate (WTI) crude for November delivery rose 12 cents, or 0.1%, to $88.94 a barrel on the New York Mercantile Exchange. This follows Monday's close at its lowest level since September 13.
- December Brent crude, the global benchmark, was up 4 cents, or less than 0.1%, at $94.75 a barrel on ICE Futures Europe. Brent closed at its lowest point since September 11 on Monday.
Profit-taking after recent rally
Analysts believe that profit-taking was to be expected following the rally that briefly pushed WTI prices above $95 a barrel last week, a level not seen since August 2022. The tightening supplies and anticipation of a significant deficit in the fourth quarter have been key factors contributing to the recent surge in crude prices. Additionally, Saudi Arabia's decision to cut production by 1 million barrels a day, starting in July, has significantly influenced the market.
Dollar strength and treasury yields impact crude prices
The recent surge in the U.S. dollar and an increase in treasury yields have also influenced profit-taking in the crude market, according to analysts. A stronger dollar makes crude more expensive for users of other currencies, while rising yields raise concerns about the economic outlook and increase the opportunity cost of holding nonyielding assets.
Turkey to Restart Pipeline from Iraq
The energy minister of Turkey announced on Monday that the country is set to restart a pipeline from Iraq that has been closed for approximately six months. The minister stated that the pipeline would have the capacity to provide close to 500,000 barrels of crude oil per day to global markets, according to Reuters.
OPEC+ Meeting and Market Attention
While it is not expected that the panel will revise OPEC+ production plans, traders are prepared for any potential announcement from Saudi Arabia regarding its voluntary production cut of 1 million barrels per day. Saudi Arabia had previously declared in September that this cut would be extended until the end of the year, but it could be subject to adjustment based on certain factors.
Uncertainty and Central Bank Actions
Despite the anticipation surrounding the OPEC+ meeting, Helima Croft, Head of Global Commodity Strategy at RBC Capital Markets, believes that a significant announcement from Saudi Arabia is unlikely at this time. Croft points to persistent uncertainty in the broader macro outlook and ongoing central bank actions as factors that would discourage such a declaration.
