By Crude prices recouped some of the losses seen over the last couple of sessions on Tuesday as the market awaited the release of a monthly oil outlook report.
The Organization of the Petroleum Exporting Countries is expected to release its monthly oil market report later on Tuesday.
Oil prices had tumbled over the last few sessions as the dollar surged after Republic Donald Trump secured victory in the 2024 US presidential election last week.
A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers, limiting demand for the fuel.
Prices had moved lower earlier on Tuesday as concerns over oversupply in the market and poor demand have kept bulls away.
In addition, time spreads for Brent crude oil and the West Texas Intermediate (WTI) oil have collapsed recently, moving closer to contango, said Warren Patterson, head of commodities strategy at ING Group.
Contango is a situation when the spot price of a commodity is lower than the forward contracts, which indicates an adequately-supplied market.
At the time of writing, the price of WTI crude prices were $68.47 per barrel, up 0.7%, while Brent was also trading 0.7% higher at $72.33 per barrel.
OPEC’s conundrum
OPEC will release its monthly report on Tuesday, which may have further revisions to demand outlook for crude oil demand.
Patterson said:
There is the potential for further demand revisions from the group.
The cartel recently extended the crude oil voluntary production cuts of 2.2 million barrels per day till the end of December. The cuts were set to expire at the end of November.
The decision was taken as oil prices remained weak, with the WTI falling below $70 per barrel since the beginning of October.
Experts believe that if OPEC+ turns on the taps, the market will be flooded with extra barrels at a time when demand continues to struggle.
“Any hint that OPEC+ are opting to defend market share over targeting higher oil prices has the potential to see oil prices tumble,” Vivek Dhar, an analyst at Commonwealth Bank of Australia, told Reuters.
China demand worries
Last week, China’s National People’s Congress unveiled a stimulus package worth $1.4 trillion to finance the local government’s debt.
However, financial markets were not impressed as commodity prices fell on lack of clarity about the package and focused stimulus for targeted sectors.
China, the top oil importer, also released inflation data over the weekend, which showed that consumer prices rose at its slowest pace in the last four months in October.
Producer price deflation also deepened, worrying traders and investors across the world.
“Trump trade” weighs on oil market
President-elect Donald Trump is likely to support more drilling over federal US lands and also make the country the largest supplier of shale gas.
More production of oil and gas is bearish for crude prices in the long-term.
Trump is also set to roll back several climate regulations passed under President Joe Biden.
However, Trump could also impose stricter sanctions on Iran and Venezuela’s oil supplies, which could be positive for oil prices in the short-term.
Though Iran and Venezuela are still under sanctions, the Biden administration had not pursued stricter implementation of those in the last four years.
This led to an increase in exports from both countries. Under Trump, all that could change.
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