Oil rallies ahead of OPEC meeting

Oil prices edged higher on Tuesday, with WTI price rising to $90.0 per barrel. If WTI price declines, it may encounter support near $88.0 per barrel, while resistance may be found near $95.3 per barrel.

Oil prices dipped on Monday as investors saw a chance to profit from the recent high oil prices. Traders took profits on Monday concerned about a correction in the overly high oil prices of the past few days. Oil prices rallied on Tuesday though, even though the dollar continued gaining strength. 

Oil prices are also kept in check by a strong US dollar and high-interest rates. The oil demand outlook has declined as the Fed has hinted at further tightening. The Fed decided to pause rate hikes at its September policy meeting, but that does not necessarily mean it has reached its rate ceiling. Even if the Fed has reached its interest rate ceiling, rates are likely to stay high for longer to bring inflation down. 

Deterioration in China’s economic outlook is also keeping oil prices down. Uncertainty over China’s economic recovery has put a cap on oil prices. China is the world’s largest importer and a weaker Chinese oil demand outlook has put pressure on oil prices. The World Bank on Monday forecast China’s growth for 2023 at 5.1%, up from 3% in 2022 but still representing a slowing growth pace since April.

Supply concerns have been boosting oil prices in the past couple of weeks. Russian authorities have decided to restrict diesel and gasoline exports to stabilize domestic fuel prices. Russia, however, decided to relax the fuel ban last week, assuaging supply concerns. Russia lifted restrictions on certain fuel types, specifically fuel used as bunkering for some vessels and diesel with high Sulphur content. 

The OPEC+ organization is meeting again on Wednesday. The producer group is expected to keep its output policy unchanged on Wednesday, maintaining its recent cuts by Russia and Saudi Arabia, which have already been extended till the end of the year. Tight oil supply is keeping prices up, even in the face of a diminishing demand outlook.

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Written by:
Myrsini Giannouli

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