Crude oil contracts concluded on a positive note on Tuesday, October 3, buoyed by prevailing tight oil supply conditions. This factor contributed to a resurgence in oil prices, allowing them to recover from a three-week low earlier in the day, which had been driven by the strengthening U.S. dollar.
WTI crude oil futures ascended by 41 cents, equivalent to a 0.5% increase, ultimately closing at $89.23 per barrel. Similarly, BRENT crude futures edged up by 21 cents, a 0.2% gain, settling at $90.92 per barrel.
During the initial trading session, WTI experienced a dip, reaching as low as $87.76, marking its lowest point since September 12. Simultaneously, Brent crude also saw a decline, hitting $89.50, its lowest level since September 8. These declines were largely attributed to the dollar’s strengthening, which had been exerting pressure on the market.
The U.S. Dollar Index, reflecting the dollar’s performance against a basket of six major currencies, surged to 107.0062, reaching its highest point in ten months. This upswing was triggered by the revelation that U.S. job openings in August had surged to 9.61 million positions, marking the highest level since April. Consequently, speculation arose regarding the possibility of the Federal Reserve (Fed) raising interest rates at its upcoming November meeting.
The appreciating dollar had rendered crude oil contracts priced in dollars less appealing to investors holding alternative currencies. Additionally, market concerns arose over the potential economic and demand implications stemming from an interest rate hike.
Nevertheless, oil prices rebounded as investors maintained an optimistic outlook on the trend of constrained oil supply in the global market. This positivity was sustained after Saudi Arabia extended its voluntary oil production cut of 1 million barrels per day until the end of the year. Furthermore, Russia extended the duration of its oil export reduction by 300,000 barrels per day, also until year-end.
Meanwhile, the American Petroleum Institute (API) reported a 4.2 million barrel decrease in U.S. crude oil inventories for the week ending September 29, surpassing analysts’ expectations by 92,000 barrels.
Investor attention remained fixed on the imminent release of official crude oil stock data from the U.S. Energy Information Administration (EIA).
The Joint Ministerial Monitoring Committee (JMMC) of the Organization of the Petroleum Exporting Countries (OPEC) and allied countries, collectively known as OPEC Plus, convened on this day. Reports indicated that the meeting is expected to endorse the continuation of current production policies, which entail OPEC+ reducing production by a cumulative total of 3.66 million barrels per day until the conclusion of 2024.
The Spot Market is Open
Wednesday, October 4, 2023