Oil edged higher after a volatile session in which traders weighed physical market stiffness against macroeconomic concerns that are clouding the outlook for demand.
West Texas Intermediate settled near $89 a barrel after swinging in a range of about $2.50 during the day, tracking equity markets. Traders are digesting messages that the Federal Reserve will have to leave borrowing costs higher for longer, which has strengthened the dollar in recent sessions.
“Oil’s move down has very little to do with fundamentals and everything to do with rising Treasury yields and the strength of the U.S. dollar,” said Warren Patterson, chief commodities strategist of ING Groep NV. “I still think oil has room to go higher. Basically, it looks constructive.”
In addition to headwinds, Russia is considering lifting the ban on foreign diesel exports, but a final decision has yet to be made. Russia, the world’s largest marine exporter of the diesel fuel, shocked global markets after it imposed a temporary ban on overseas shipments last month.
Fears about the health of the global economy have sent WTI down 4.5% since Wednesday’s close, halting a rally that saw it rise to $95 a barrel last week. Higher interest rates make crude more expensive to store and ship, and a stronger dollar means crude is more expensive for most buyers. The investment has come despite a series 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. The group’s delegates do not expect the panel to recommend any policy changes.
Prices:
- 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.
