Oil prices rose on Tuesday, supported by a softer US dollar and supply woes, but the lower fuel demand spectrum capped gains as China continued its tight zero-COVID policy.
Brent crude futures rose 74 cents, or 0.8%, to $92.36 a barrel as of 0505 GMT, while West Texas Intermediate (WTI) crude futures rose 78 cents, or 0.9%, to $86.24 a barrel.
The US dollar index, which measures the dollar’s value against six of its biggest peers, including the pound, fell near a week-and-a-half low as the dramatic U-turn on Britain’s controversial tax cut “mini-budget” boosted risk appetite. A weaker dollar makes oil cheaper for non-US buyers.
Investors have seen increasing their long positions in futures after the sharp output cut agreed upon earlier this month by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia.
OPEC+ member states lined up to approve the cut in production target after the White House accused Riyadh of forcing some other countries to support the move.
Meanwhile, expectations that China will maintain the loose monetary policy to help its economy, restrained by COVID-19 restrictions, gave oil prices some support. The country’s central bank did not change its key interest rate for a second month while renewing its medium-term policy loans due Monday.
The sentiment of China’s fuel demand outlook was affected after the world’s largest importer of crude oil delayed the release of its economic indicators scheduled for Tuesday. No rescheduled date was given.
China’s adherence to a zero-COVID policy continues to increase uncertainties about the country’s economic growth.
On the supply side, US crude inventories are expected to rise for the second week in a row.
The Energy Information Administration (EIA) estimates that production in the Texas Permian Basin and New Mexico, the largest shale oil field in the US, will increase by about 50,000 barrels per day (bpd) this month to reach 5,453 million barrels per day.
