Before Powell Speaks: Oil Gains Some Breath
Oil prices slipped on Tuesday, giving up some of their recent gains. At 4:50 a.m. ET (8:50 a.m. GMT), Brent November futures were down 0.5% at $67.08/barrel, while WTI was down 0.5% at $62.98/barrel. This move was more of a consolidation after the rally of the past week.
Market focus remains on supply risks stemming from the Russia-Ukraine war following attacks on Russian oil facilities. On the policy front, U.S. President Donald Trump is pushing for a “second wave” of sanctions targeting major buyers like India and China, while the European Union is reportedly considering sanctions on companies facilitating Russian oil trade. If tightened, these measures could tighten Russian exports and increase the supply risk premium.
However, bullish sentiment is capped by the outlook for a supply surplus: rising OPEC output, strong production from non-OPEC countries, and a fragile recovery in global demand, including China, which has yet to fully recover, and U.S. fuel demand, which tends to soften in the winter. Bernstein analysts warn of the risk of Brent hitting $60 if supply continues to outpace demand, with the global surplus potentially reaching 1.9 million bpd this quarter.
From a macro perspective, the weakening dollar has helped oil prices recently, as expectations of the Fed cutting 25 bps on Wednesday. While inflation remains sticky, lower interest rates have the potential to support economic activity and, ultimately, oil demand—but the direction depends heavily on the Fed's guidance tone.
Key points:
Brent $67.08 (-0.5%), WTI $62.98 (-0.5%) — post-rally consolidation.
Supply risks: attack on Russian facilities & talk of additional sanctions (US/EU).
Fundamental outlook: potential surplus; risk of Brent hitting $60 (surplus of 1.9 million bpd).
Macro: dollar weakens; market awaits Fed's 25 bps cut and further policy signals. (ayu)
Source: Newsmaker.id
