The market was waiting for the monthly oil outlook report to be released on Tuesday, and the crude prices recovered some of their losses from the previous sessions.
On Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) is expected to release their monthly oil market report.
The dollar has surged since last week, when Donald Trump won the US presidential election for 2024.
Fuel demand is reduced by a stronger dollar, which makes goods priced in greenbacks more expensive to buyers overseas.
Bulls stayed away from the market as prices fell earlier in the day due to concerns about an oversupply and low demand.
Warren Patterson, the head of commodities strategy for ING Group, stated that time spreads between Brent crude and West Texas Intermediate (WTI), as well as Brent oil, have been falling recently. They are now moving towards contango.
A situation where the spot price is lower than forward contracts indicates that the market is adequately supplied.
WTI crude was trading at $68.47 a barrel at the time this article was written, an increase of 0.7%. Brent traded 0.7% higher, at $72.33 a barrel.
OPEC’s dilemma
OPEC’s monthly report, due to be released on Tuesday, may include further revisions in the demand forecast for crude oil.
Patterson said:
The group could revise its demand in the future.
Recently, the cartel extended voluntary crude oil production cuts by 2.2 million barrels a day until the end of December. The cuts were due to expire by the end of November.
Oil prices have been weakening, and the WTI has fallen below $70 per barrel since October began.
Experts say that if OPEC+ opens the taps the market would be flooded at a time of low demand.
Vivek Dhar is an analyst with Commonwealth Bank of Australia. He told Reuters that any hint that OPEC+ will choose to defend their market share rather than target higher oil prices could cause oil prices to plummet.
China Demand Worries
Last week, China’s National People’s Congress announced a stimulus package of $1.4 trillion in order to finance local government debt.
The financial markets, however, were not pleased as the commodity prices dropped due to lack of clarity and targeted stimulus for specific sectors.
China, the world’s largest oil importer, released its inflation data at the weekend. It showed that in October, consumer prices increased at the slowest rate in the past four months.
The deflation of producer prices has also increased, causing concern among traders and investors around the globe.
The Trump trade weighs on the oil market
Donald Trump, the president-elect of the United States, is likely to encourage more drilling on federal US land and make the US the world’s largest supplier for shale natural gas.
Long-term, higher production of oil and natural gas will lower crude prices.
Trump also plans to reverse several climate regulations that were passed by President Joe Biden.
Trump may also tighten sanctions against Iran and Venezuela, which would be good for the oil price in the short term.
Although Iran and Venezuela still face sanctions, the Biden Administration has not imposed them more strictly in the past four years.
Exports of both countries increased. All that could change under Trump.
The COINPAPER published the article Oil prices recoup losses before OPEC’s Outlook report.
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