Oil prices edged higher on Tuesday supported by supply cuts by the world’s biggest oil exporters and hopes for higher demand in the developing world in the second half of 2023 despite a sluggish economic outlook.
Brent crude futures was up 66 cents to $78.35 a barrel and U.S. West Texas Intermediate crude was up 71 cents at $73.70.
Supply cuts by top exporters Saudi Arabia and Russia for August helped to lift the benchmark prices, which were also supported by the U.S. dollar hitting a two-month low.
A weaker dollar makes crude cheaper for holders of other currencies and often boosts oil demand.
“Oil has found a floor and the only thing … that could break that is if U.S. inflation is scorching hot and the Fed is forced to tighten this economy into a recession,” said OANDA analyst Edward Moya.
Markets are awaiting U.S. inflation data on Wednesday to see if price pressures are continuing to moderate, which could provide clues on the interest rate outlook.
While central bank officials said the U.S. Federal Reserve is likely to raise interest rates further to tame inflation, markets are somewhat pacified by indications that months of monetary policy tightening are nearing an end.
“Nevertheless, nerves are not completely calmed just yet. Anxiety is still palpable that recession fears could lead to downgrades in oil demand,” said PVM analyst Tamas Varga.
Still, the International Energy Agency (IEA) is standing firm with the expectation that oil demand from China and developing countries, combined with recently announced supply cuts, is likely to keep the market tight in the second half of the year despite a sluggish global economy, its head said on Monday. The IEA will be publishing new forecasts this week.
Separately on Tuesday, several sources told Reuters that top buyer China again requested less supply from the world’s biggest oil exporter, Saudi Aramco.
Meanwhile, the secretary general of OPEC on Tuesday told a Nigerian oil and gas conference that global energy demand is forecast to rise 23% by the end of 2045.
