Oil up over weak dollar, lingering supply woes after OPEC+ supply cuts

By Sibel Morrow

ANKARA (AA) - Oil prices increased on Tuesday, driven by a weaker dollar and OPEC+ supply cuts, despite the negative course of global markets due to persistent inflation and recessionary concerns.

International benchmark Brent crude traded at $78.08 per barrel at 10 a.m. local time (0700 GMT), a 0.50% gain from the closing price of $77.69 a barrel in the previous trading session on Monday.

The American benchmark West Texas Intermediate (WTI) traded at the same time at $73.42 per barrel, up 0.59% from the previous session's close of $72.99 per barrel.

The US dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, fell 0.23% to 101.39 early Tuesday.

The decline in the value of the greenback is encouraging oil-importing countries to purchase more crude oil at cheaper dollar prices in support of higher crude prices.

Meanwhile, markets are still pricing in the recent supply cuts of some major OPEC+ oil producers.

Saudi Arabia, the world’s largest exporter of crude oil, announced its intention last Monday to unilaterally extend production cuts of 1 million barrels per day (bpd) through August, leaving the door open for further extensions.

Russia followed suit with an announcement of a voluntary reduction of exports by 500,000 bpd in August, on top of the 700,000 bpd in place since March.

Algeria later said it would also reduce output by an extra 20,000 bpd in August, bringing its total cuts to 68,000 bpd since April.

The new reductions were additions to the group’s already existing output cap of around 2 million bpd announced in October 2022 and 1.6 million bpd announced in May.

However, the monetary tightening steps of major central banks in response to inflationary surges, persistent geopolitical risks, and growing recessionary concerns continue to limit further price upticks.

The latest data from the Chinese National Bureau of Statistics pointed to a very sluggish recovery in the world's second-largest economy, as the country’s factory-gate prices fell at the fastest pace in more than seven years in June, while consumer prices were flat on the year, the slowest since 2021.

Investors are monitoring the data flow from major economies and the oil market reports of OPEC and the International Energy Agency, as well as US crude oil inventories, which provide a short-term outlook for the country's oil demand.

The American Petroleum Institute (API) is scheduled to announce its estimates on stockpiles late Tuesday, while the US Energy Information Administration (EIA) will release the actual data on Wednesday.