Oil prices rose on Tuesday as the US dollar eased against major peers but gains were limited by worries of slowing global fuel demand growth amid bearish economic data from key oil importing economies such as China.
International benchmark Brent crude futures gained 3 cents to US$93.29 per barrel by 0652 GMT, after falling 0.3% in the previous session. U.S. West Texas Intermediate crude futures for December delivery rose 11 cents to US$84.69 per barrel, after a previous decline of 0.6%.
The greenback eased on Tuesday amid signs U.S. Federal Reserve rate hikes are putting the brakes on the world’s biggest economy, while risk sentiment improved as Rishi Sunak prepared to become Britain’s prime minister.
A weaker U.S. dollar makes dollar-denominated oil less expensive for other currency holders and helps push prices higher.
However, signs of uncertain economic activity in the United States and China, the world’s two biggest oil consumers, limited the increase.
“The intraday price swings aside, Brent and WTI futures are stuck in a relatively narrow band since Thursday,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
Supply and demand fundamentals remain largely stable, leaving economic sentiment at the centre-stage for the oil market, Hari added.
“Much of the souring outlook on demand has already been baked in, so any further downward pressure may be slow-acting,” she said.
U.S. business activity contracted for a fourth month in October, with manufacturers and services firms saying in a monthly S&P Global survey of purchasing managers published on Monday that client demand is falling .
That weakening could indicate that the Fed’s interest rate increases to fight inflation have been working and may persuade it to slow its rate hike policies, a positive signal for fuel demand.
Also on Monday, government data showed China’s crude oil imports in September were 2% lower than a year earlier, continuing a trend of lower imports at the same time it reported slowing retail sales.
U.S. crude oil inventories are also expected to rise this week, which may limit price gains. Analysts polled by Reuters estimated on average that crude inventories rose by 200,000 barrels in the week to Oct. 21.
Analysts estimated stockpiles of gasoline fell by about 1.2 million barrels and distillate inventories, which include diesel and heating oil, were expected to have dropped by 1.1 million barrels last week.
Separately, International Energy Agency head Fatih Birol said on Tuesday the world will still need Russian oil to flow to the market despite a price cap, with between 80% to 90% an “encouraging level” to meet demand.
Many details of a price cap on Russian oil still have to be ironed out, Birol said during the Singapore International Energy Week.