Oil edged higher after a volatile session where traders weighed tightness in the physical market against macroeconomic concerns that are clouding the outlook for demand.
West Texas Intermediate settled near $89 a barrel after swinging in a roughly $2.50 range for the day, tracking equity markets. Traders are digesting messaging that the Federal Reserve will need to leave borrowing costs higher for longer, which has strengthened the dollar in the last few sessions.
“Oil’s downward move has very little to do with fundamentals and all to do with rising Treasury yields and the stronger US dollar,” said Warren Patterson, head of commodities strategy at ING Groep NV. “I still think oil has some room to move higher. Fundamentally, it is looking constructive.”
Adding to bearish headwinds, Russia is mulling lifting its overseas diesel export ban, but a final decision has yet to be made. Russia, the world’s largest seaborne exporter of diesel-type fuel, shocked global markets after setting a temporary ban on shipments abroad last month.
Fears about the global economy’s health have pushed WTI down 4.5% from Wednesday’s close, halting a rally that saw it surge to $95 a barrel last week. Higher interest rates make storing and shipping crude more expensive, and the strengthening dollar means crude is pricier for most buyers. The reversal has come despite a spate of purchases of key oil grades by the trading arm of China’s top refiner.
OPEC+ ministers will meet to review global markets on Wednesday. Delegates from the group don’t expect the panel to recommend any policy changes.
- WTI for November delivery rose 41 cents to settle at $89.23 a barrel in New York.
- Brent for December settlement rose 21 cents to settle at $90.92 a barrel.