Crude Oil Prices Rise as US Dollar Slides
Oil prices extended gains on Tuesday from the easing value of the US dollar that encouraged cheaper oil purchases and positive demand indicators from China, the world’s second-largest oil consumer.
The international benchmark Brent crude traded at $92.14 per barrel, translating to a 0.57% gain from the closing price of $91.62 a barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI), trading at $85.05 per barrel at the same time, increased 0.62% after the previous session closed at $84.53 a barrel.
The US dollar had been hovering at around 20-year highs last month, pushing Brent price down to $82 a barrel. Subsequently, the greenback declined in value against other currencies, encouraging buyers of dollar-denominated crude oil.
The US dollar index that pits the dollar against a basket of six global currencies, lost 0.04% to 111.85. Supply uncertainties that have weighed on COVID-affected markets grew worse with the outbreak of the Russia-Ukraine war, sparking an energy clash between the EU and Russia, the bloc’s largest fossil fuel supplier.
As EU countries scrambled to find alternative suppliers, the OPEC+ cartel reduced the collective production target by 2 million barrels per day (bpd) earlier in October. Actual cut is 1.1 million bpd and not 2 million bpd as OPEC fell short of its output quota in August by 3.6 million bpd. READ:Oil Prices Rise over Signs of Economic Recovery in China
The United States slammed Saudi Arabia, the de-facto leader of OPEC+, for its November output decision. However, the group’s decision has received strong support from individual statements from its member countries.
The Iraqi State Petroleum Marketing Company said the cut is “a significant step in the right direction to achieve market stability especially in light of the current downturn.” READ:Oil Slides over Weak Economic Outlook in China
Saudi Arabia said the country was making significant efforts to support balance and stability in the global oil markets, including the formation and upkeep of the OPEC+ alliance. Several OPEC+ members including the United Arab Emirates (UAE), Oman and Algeria also supported the group’s decision.
‘I would like to clarify that the latest OPEC+ decision, which was unanimously approved, was a pure technical decision, with NO political intentions whatsoever,’ the UAE energy minister Suhail al-Mazrouei wrote on Twitter.
Energy crisis tops EU leaders’ meeting agenda
The looming energy crisis will be the focal point of EU leaders’ meeting agenda on Oct. 20-21, the EU Council head said Tuesday.
In his invitation letter to EU leaders, Charles Michel said they “must act with the utmost urgency” on the energy crisis, adding: “We must imperatively intensify our three lines of action: reducing demand, ensuring security of supply and containing prices.”
The leaders at the European Council meeting will also discuss measures to reduce prices by “fully capitalising on the negotiating clout of our unity at 27 by jointly purchasing gas, developing a new benchmark that more accurately reflects conditions on the gas market, and examining a temporary dynamic price limit,” said Michel.
“I also expect us to address other short and long-term market interventions, such as an EU framework to cap the price of gas for electricity generation,” he added.
Michel noted that although member states have different national constraints, he said he is confident that discussions will be constructive and mindful of the bloc’s “urgent collective interest.”
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