Oil prices edged lower on a stronger dollar and signs of profit-taking, after a rally in July when investors bet on tighter global supplies and demand growth in the second half of 2023.
Brent crude futures for October were at $85.17 a barrel at 12:45 p.m. ET (1645 GMT) on Tuesday, down 26 cents or 0.3 per cent. Front-month Brent settled on Monday at its highest since April 13.
U.S. West Texas Intermediate crude futures were at $81.59 a barrel, down 21 cents or 0.3 per cent from the previous session’s settlement, which was its highest since April 14.
“Crude is moving in a corrective phase this morning, prompted by a sharply higher U.S. dollar index and satisfying the ‘overbought’ market situation,” said Dennis Kissler, senior vice president of trading at BOK Financial.
The dollar index, a measure of the greenback against six major currencies, rose 0.42 per cent. A stronger dollar makes crude more expensive for investors holding other currencies.
PVM analyst Tamas Varga noted that for months, predictions have been made that global oil demand will grow in the second half of 2023 versus the first, in tandem with supply cuts to reduce global oil inventories.
Recession worries made investors more cautious earlier in the year, he said.
“Then July arrived and the mood has promptly changed,” he added, citing the action of central banks that has investors more confident that a “soft landing” is achievable and recession avoidable in major economies.
The latest figures from the U.S.– the world’s biggest fuel consumer – showed fuel demand rose the highest level since August 2019. A Reuters poll also estimated U.S. crude oil and gasoline stockpiles were expected to have declined last week.
Data from industry group American Petroleum Institute is expected later in the day.
To revive China’s private sector amid a flagging economic recovery following a protracted period of COVID restrictions, Chinese ministries, regulators and the central bank on Tuesday pledged more financing support to small businesses.
Meanwhile, data released on Monday showed manufacturing activity in the euro zone contracted in July at the fastest pace since May 2020, tempering enthusiasm.
On the supply side, this Friday’s OPEC+ meeting is expected to see Saudi Arabia roll its voluntary cuts through September, further tightening supplies.
OPEC oil output fell in July after Saudi Arabia made an additional voluntary cut as part of the OPEC+ producer group’s latest agreement to support the market, and an outage curbed Nigerian supply, a Reuters survey found on Monday.
In a conference on Monday, BP chief Bernard Looney presaged oil demand growth continuing into next year and OPEC+ being increasingly disciplined.