The U.S. dollar strengthened as traders awaited clues from the minutes of the U.S. Federal Reserve meeting as the price of Brent oil opened marginally lower on Tuesday.
On Monday, prices rose due to optimism about demand amid tightened supplies.
Tuesday’s price of $83.57 a barrel for Brent crude was down 59 cents, or 0.5%. WTI for the March month of the United States, which expires on Tuesday, was up 78 cents, or 1.02%, at $77.12 at 0146 GMT.
Due to a public holiday in the United States, WTI futures did not settle on Monday. The most active WTI contract, for April, was up 52 cents, or 0.68%, at $77.07.
Oil markets have pulled back following yesterday’s recovery, according to Tina Teng, an analyst at CMC Markets.
“The U.S. dollar rose and pressed on the oil price in the Asian session today,” she said.
The minutes of the most recent Federal Reserve meeting is coming on Wednesday, and traders are eagerly awaiting them because recent figures on core inflation have increased the likelihood that interest rates will continue to rise.
All eyes are now on China’s monetary policy, the world’s largest economy and top oil user, as oil imports from China are predicted to reach a record high in 2023 and demand from India, the third-largest oil importer in the world, is increasing amid tightening supplies.
Experts predict that despite near-term obstacles like U.S. interest rate hikes, oil prices may rise in the next weeks due to a shortage and a pickup in demand.
According to OANDA analyst Edward Moya, “China’s demand for Russian oil has returned to the levels witnessed at the start of the war in Ukraine.”
The West will exert pressure on China and India to avoid looking for alternate suppliers, which should maintain the oil market competitive, according to Moya.
Once the West set price ceilings on Russian oil and oil products, Russia decided to reduce its oil production by 500,000 barrels per day (bpd), or approximately 5% of its total output, in March.
Oil markets continue to experience an undersupply problem as a result of China’s reopening and expected Russian output cuts, according to CMC’s Teng, “despite the short-term price action to the U.S. excessive inventory build from last week.”
