Futures Movers: Oil prices steady after pulling back to 3-week lows

Oil futures inched higher on Tuesday, a day after a three-session decline pulled prices to roughly three-week lows.

Oil remains near its highs of 2023, however, having surged in the third quarter on worries over tightening crude supplies.

Price action

  • West Texas Intermediate crude
    CL00,
    +1.05%

    for November delivery
    CL.1,
    +1.05%

    CLX23,
    +1.05%

    rose 47 cents, or 0.5%, to $89.29 a barrel on the New York Mercantile Exchange, after ending Monday at its lowest since Sept. 13.

  • December Brent crude
    BRN00,
    +0.50%

    BRNZ23,
    +0.50%
    ,
    the global benchmark, was up 15 cents, or 0.2%, at $90.86 a barrel on ICE Futures Europe. Brent on Monday closed at its lowest since Sept. 11.

  • November gasoline
    RBX23,
    -2.09%

    traded at $2.3948 a gallon, down 0.7%, while November heating oil
    HOX23,
    -1.74%

    shed 1.1% to $3.1858 a gallon.

  • Natural gas for November delivery
    NGX23,
    +3.06%

    traded at $2.901 per million British thermal units, up 2.2%.

Market drivers

Analysts said crude was ripe for profit-taking after a rally last week that briefly took WTI above $95 a barrel for the first time since August 2022. Tightening supplies and expectations for a significant deficit in the fourth quarter have helped propel the crude rally. A production cut of 1 million barrels a day by Saudi Arabia, which was implemented in July, has been cited as a primary driver.

A surging U.S. dollar and a rise in Treasury yields, with the rate on the 10-year note at a roughly 16-year high on Monday, helped spark profit-taking in crude, analysts said. A stronger dollar makes crude more expensive to users of other currencies, while rising yields raise worries about the economic outlook and increase the opportunity cost of holding nonyielding assets.

Meanwhile, the “global economic slowdown and falling final demand” are now working against oil, said Alex Kuptsikevich, senior market analyst at FxPro, in market commentary.

Still, data released Tuesday showed that U.S. job openings in August rose to 9.6 million, just a month after falling to a more than two-year low.

More solid support for oil may only come with a drop to $78, which is the 50-week moving average, said Kuptsikevich, “but we wouldn’t be surprised to see a drop to $75 by the end of the year.”

Elsewhere, Turkey’s energy minister on Monday said the country would restart a pipeline from Iraq that has been closed for around six months. The pipeline would be able to provide nearly 500,000 barrels a day of crude to global markets, the minister said, according to Reuters.

Traders are also looking ahead to an OPEC+ meeting of the Joint Ministerial Monitoring Committee, or JMMC, on Wednesday. The panel is made up of oil ministers from members of the Organization of the Petroleum Exporting Countries and its Russia-led allies and has the authority to call for a full OPEC+ meeting if it decides one is needed.

The panel isn’t expected to alter OPEC+ production plans, but traders will be braced for any announcement from Saudi Arabia around its voluntary production cut of 1 million barrels a day, which Riyadh announced in September would be extended through year-end, but could be subject to adjustment.

“While we continue to contend that one should always be prepared for a Saudi surprise, we are not anticipating that the Kingdom will declare ‘mission accomplished’ at this juncture, especially given the continuing uncertainty about the broader macro outlook and central bank action,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said in a note.

Over in the U.S., the Energy Information Administration will release its weekly domestic petroleum supply report Wednesday morning.

On average for the week ended Sept. 29, analysts expect the report to show a supply decline of 1.4 million barrels for crude, according to a survey conducted by S&P Global Commodity Insights. Gasoline stockpiles are expected to be unchanged for the week, while distillate inventories are forecast to fall by 1.6 million barrels.

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