Brent Rises as Weak US Dollar Offsets Demand Pressure
Brent crude futures rose almost 3% towards $95 per barrel on Tuesday, recovering from their daily lows of around $91, as a weaker dollar and general risk appetite offset concerns about weak global demand.
Investors welcomed a softer-than-expected US PPI reading which pointed to further evidence of a slowdown in inflation while reinforcing the case for a less aggressive Federal Reserve.
Still, fundamentals in the oil complex continue to be clouded by concerns of a potential recession-driven demand downturn. OPEC further trimmed its global oil demand growth forecasts for 2022 and 2023, citing mounting economic challenges such as high inflation, rising interest rates, and supply chain disruptions.
Investors also continued to fret about resurgent Covid outbreaks in top crude importer China which made the possibility of an economic reopening more uncertain. READ: Sterling Slides after Recovering from Multi-Year Low
WTI crude futures rose above $87 per barrel on Tuesday, rebounding from their daily lows of around $84, as a weaker dollar and general risk appetite offset concerns about weak global demand.
Earlier in the morning, oil prices fell following OPEC’s revision of its demand growth forecast, and COVID cases in China, the world’s second largest oil consumer, added to the downward price pressure.
International benchmark Brent crude traded at $92.79 per barrel in the morning, a 0.37% decrease from the closing price of $93.14 a barrel in the previous trading session. The American benchmark West Texas Intermediate (WTI) traded at $85.27 per barrel at the same time, a 0.70% loss after the previous session closed at $85.87 a barrel.
China’s strict ‘zero-COVID’ policy, which includes immediate lockdowns, widespread testing, intensive contact tracing, and quarantines to eliminate infections as soon as they emerge, remains the oil market’s elephant in the room.
‘While this raises hopes for a demand recovery, surging case numbers continue to be a key downside risk. Another round of lockdowns cannot be ruled out if cases keep rising,’ Australia and New Zealand Banking Group (ANZ) Commodity Strategist Daniel Hynes said in an e-mailed note.
The country announced its decision to shorten the quarantine period for visitors to China and lift some restrictions on international flights last week.
Meanwhile, the Organization of Petroleum Exporting Countries (OPEC) reduced global oil demand growth forecasts for 2022 and 2023 by 0.1 million barrels per day (bpd), putting further downward pressure on prices. # Brent Rises as Weak Dollar Offsets Demand Pressure