Oil prices rose for a fourth day as a weaker dollar offset worries about global demand and progress on a nuclear deal with Iran stalled.
West Texas Intermediate futures rose above $88 a barrel in a volatile session, coming off a three-day gain of about 7%. If the U.S. benchmark ends higher on Tuesday, it will be its longest winning streak since mid-May.
US Secretary of State Anthony Blinken said it was “unlikely” that the US and Iran would reach a new deal anytime soon, echoing recent comments by France, Germany and Britain and dismissing the possibility of any significant increase in Iranian oil supplies in the near term.
Crude oil hit its lowest level since January earlier this month as investors worried about global consumption, including in top importer China, where authorities are pushing for tough virus restrictions, and as the European Union prepares plans to cut off electricity to against the background of the energy crisis. Still, after hitting a record high last week, the dollar fell, making goods cheaper for foreign buyers ahead of key U.S. inflation data due on Tuesday.
US inflation prints will detail price pressures in August, and economists expect the headline figure to decline year-on-year, in part due to cheaper gasoline. Still, traders still expect another big rate hike from the Fed next week, taking cues from officials who support that view.
At the same time, some leading banks have lowered their oil price expectations for the rest of this year. According to the note, Morgan Stanley cut its Brent price forecast for this quarter and next, following a similar move by UBS Group AG earlier this week.
“We do not expect a sustained rally in the near term,” Morgan Stanley analysts, including Martin Raths, said in a note. “Slowing growth in all major economic blocs points to a decline in oil demand for some time and this is also visible in the oil data. China made a particularly important contribution to this.”
Prices:
- WTI for October delivery was up 0.5% at $88.21 a barrel on the New York Mercantile Exchange at 7:48 a.m. in London.
- The price of Brent rose by 0.5% to $94.42 per barrel on the ICE Futures Europe exchange compared to November.
- Widely observed time spreads have been volatile. The Brent spot spread — the difference between the two nearest contracts — was $1.09 a barrel, down from 86 cents last Tuesday and $1.47 two weeks ago
Oil investors will get an important insight into the market’s near-term outlook later on Tuesday when the Organization of the Petroleum Exporting Countries releases its monthly analysis. The producer group and its allies, including Russia, announced a reduction in token supply at a meeting last week.
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