Dubai: Oil gained amid a broader market rally as investors continued to weigh a tight market against concerns over a global economic slowdown.
West Texas Intermediate rose above $86 a barrel, with a weaker dollar also making commodities priced in the currency more attractive. While time spreads are signaling tightness ahead of OPEC+ output cuts from November, bearish factors such weak Chinese demand and aggressive monetary policy from central banks continue to drag on the market.
The market is in “limbo at the moment with a negative macro backdrop and a tighter supply outlook,” said Warren Patterson, the head of commodities strategy at ING Groep NV. “At the moment, I suspect the market is more worried about what implications a slowdown will have on demand.”
Crude has lost around a third of its value since early June, erasing all the gains made after Russia’s attack on Ukraine. European Union sanctions on the OPEC+ producer are set to take effect from December, prompting traders and refiners to book storage tanks in anticipation of a supply crunch.
The war has also led to a number of companies winding down their investments in Russia. Exxon Mobil Corp. said it had completed its exit from the country, calling the departure an “expropriation” of its main Russian operation and potentially setting up a future legal challenge.
China has vowed to stick with its Covid Zero policy, a strategy that has battered its economy and crimped energy consumption. China’s decision to delay the publication of key economic data including third-quarter gross domestic product injected a note of caution to trading in the region.
The US is moving toward a release of another 10 million to 15 million barrels of oil from the nation’s emergency stockpile in a bid to balance markets and keep gasoline prices from climbing further, according to people familiar with the matter. Separately, the Biden administration is still weighing limits on exports of fuel, two of the people said.