Oil prices fell for the fourth day in a row, pressured by macroeconomic concerns, which overshadowed the decline in actual market supplies, derailing the demand outlook.
The price of West Texas Intermediate crude approached $88 per barrel in trading after falling by 2.2% in the previous session. While sovereign bonds and stocks continued their losses around the world until Tuesday, the price of the US dollar rose as traders appreciated the signs that the Federal Reserve will need to maintain high borrowing costs for a longer period.
Since the close of last Wednesday until now, West Texas Intermediate crude oil has declined by about 6% due to global economic concerns, which halted the rise that reached 29% in the last quarter due to lack of supply, which in turn led many analysts to expect oil to reach a price of $100 per barrel.
Higher interest rates also increase the cost of storing and shipping crude oil, and a stronger dollar means oil has become more expensive for most buyers.
Bullish outlook for oil
Warren Patterson, head of commodity strategy at ING Groep NV, said: The downward move in the price of oil has little to do with fundamentals, but more to do with rising Treasury yields and a stronger US dollar. He added: I still believe that oil has room to rise. In terms of market fundamentals, the trend appears to be bullish.
Market tightening enhances expectations that oil will return to the $100 level
Futures curves still point to tight supply in the near term, but have softened compared to last week. The spot price difference for West Texas Intermediate crude is $1.65 per barrel in the case of a bullish backorder , compared to $2.60 last Thursday.
For its part, the Organization of the Petroleum Exporting Countries kept production rates steady without increasing last month, as the organization and its allies continued to restrict supplies. Members of the OPEC+ alliance are scheduled to meet in a virtual meeting to review global market data on Wednesday, but the alliance shows no signs of easing its restrictions.
US oil inventories decline
The decline in supplies also led to a drawdown of inventories at the US headquarters in Cushing, Oklahoma. Traders will focus on the data that will be announced by the sector-funded American Petroleum Institute later on Tuesday, with the aim of knowing estimates of US inventories during the past week, before the release of official data on Wednesday.
Oil stocks in the largest US storage center fall to critical levels
The supply shortage is being partly offset by increased production in the United States. Meanwhile, Turkey said that the main oil pipeline extending from northern Iraq to the Mediterranean Sea could resume work this week, which in turn could put further downward pressure on oil, although an Iraqi official doubted the possibility of restarting the oil pipeline during... This week.
For its part, Citigroup expects the price of Brent crude to fall to a low of $70 a barrel next year as the market returns to surplus. He said in a note that demand appears limited, and there are larger oil supplies coming to the market from suppliers outside (OPEC+).
