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Oil rises on OPEC+ cuts, weaker dollar
Global Banking & Finance Review®
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By Arathy Somasekhar and Sudarshan Varadhan
(Reuters) -Oil prices edged higher on Tuesday, recouping some of the losses from the previous session, as traders focused on supply cuts by the world’s biggest oil exporters Saudi Arabia and Russia and a weaker dollar.
Brent crude futures rose 23 cents, or 0.3%, to $77.92 a barrel by 0153 GMT, and U.S. West Texas Intermediate crude was up 32 cents, or 0.4%, at $73.31.
Prices had eased 1% on Monday on higher expectations that further U.S. interest rate hikes are coming and as investors booked profits after last week’s 4.5% rise.
Supply cuts by the world’s biggest oil exporters Saudi Arabia and Russia set for August helped to lift the benchmark prices, which were also supported as the U.S. dollar fell to a two-month low. A weaker dollar makes crude cheaper for holders of other currencies and often boosts oil demand.
“Oil has found a floor and the only thing … that could break that is if U.S. inflation is scorching hot and the Fed is forced to tighten this economy into a recession,” said Edward Moya, an analyst at OANDA.
While central bank officials said the U.S. Federal Reserve will likely need to raise interest rates further to bring down inflation, markets took comfort from indications the officials also think the current monetary policy tightening cycle was getting close to an end.
Energy traders are also anticipating that China will do more to support its economic recovery, Moya said.
Any weak economic forecasts by U.S. banks kicking off their earnings season, however, could weigh on prices, he said.
Saudi Arabia last week said it would extend its 1 million barrels-per-day (bpd) cut at least to August, and Russia said it would cut its oil exports next month by 500,000 bpd.
Traders were also looking ahead to U.S. crude inventory data due later on Tuesday from industry group American Petroleum Institute. Analysts expect a build of 200,000 barrels. [API/S]
Investors as well awaited the release later this week of U.S. Consumer Price Index data, a key inflation report, and economic reports from China to gauge the outlook for demand.
(Reporting by Arathy Somasekhar and Sudarshan Varadhan; Editing by Tom Hogue)
OPEC+ is a coalition of oil-producing countries, including OPEC members and other major producers like Russia, that coordinate production levels to influence oil prices.
The U.S. dollar is the primary currency used for oil transactions globally. A weaker dollar makes oil cheaper for holders of other currencies, potentially increasing demand.
Supply cuts refer to reductions in oil production by major oil-producing countries to stabilize or increase oil prices in the market.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
Crude oil is a natural, unrefined petroleum product composed of hydrocarbon deposits and other organic materials, used to produce fuels and other products.
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