Oil Prices Rise as Traders Show Cautious Optimism

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Cautious optimism informed the bulk of oil trading on Tuesday, with skittish traders weighing a variety of economic factors in the face of global banks vowing to fight inflation with further rate hikes, but ultimately unable to ignore the realities of tightening commodity supplies. 

Brent settled up 63 cents at $93.96 per barrel, while West Texas Intermediate settled up 71 cents at $90.39.

Trading was also affected by the U.S. dollar hitting a 10-month high on Tuesday, with higher bond yields attracting investors but capping any potential gains for crude.

Despite choppy oil trading of late, Bloomberg pointed out that crude has added about 25 percent since June and is heading for the biggest quarterly gain since March 2022 thanks to extended supply curbs by Saudi Arabia and Russia, said to be in action until the end of this year; also, “The rally led hedge funds to boost their bullish bets on WTI to the highest since February 2022 and has rekindled talk of the $100-a-barrel crude.”

However, while in recent previous sessions a host of analysts predicted oil to hit $100 in the near future, Tamas Varga, an analyst at PVM, bucked the trend on Tuesday by addressing new fears of a temporary U.S. government shutdown: "The threat of U.S. government shutdown and its potential impact on the country's credit rating can also be a factor in oil finding it increasingly challenging to provoke the magical $100/bbl target."

In other oil related news on Tuesday, tanker-tracking data monitored by Bloomberg showed  that Russian crude oil exports by sea dipped by around 100,000 barrels per day (bpd) to 3 million bpd last week and by 100,000 bpd to 3.2 million bpd in the four weeks to September 24, due to port maintenance work; so far for September, Russian crude oil exports by sea have stayed at some 640,000 bpd below the high levels in April and June.

Also on Tuesday, the International Energy Agency in its updated Net Zero Roadmap stated that the world would not need any new long lead-time conventional oil and gas projects or coal mines approved after 2023, as the surge in clean energy deployment could lead to peak fossil fuel demand this decade.

The IEA said, “The announced manufacturing pipeline for solar PV and batteries is projected to be sufficient to meet the NZE Scenario deployment needs to 2030,” and it added, “Low-emissions electricity rises so rapidly that no new unabated coal plants beyond those under construction at the start of 2023 are built….the sharp decline in fossil fuel demand in the NZE Scenario means that no new conventional long lead time oil and gas projects are approved for development after 2023, and that there are no new coal mines or coal mine lifetime extensions.”