Weak Dollar Boosts Crude Prices But Bearish Sentiment Remains Undiminished

Meanwhile, OPEC output sinks in January: File Image/Pixabay

A weaker U.S. dollar saved crude from another session of trading doldrums on Tuesday; however, fears of bank rate increases and healthy flows of Russian oil despite the sanctions against that country caused futures to touch their lowest level in almost three weeks earlier in the session.

The second-month Brent contract settled up 96 cents at $85.46 per barrel, while West Texas Intermediate settled up 97 cents at $78.87 per barrel.

But the rise didn't impress Bloomberg, which noted, "With January's decline now set, oil has fallen in seven of the past eight months.

"The commodity has also been stonewalled by its 100-day moving average, and economists are forecasting a 65 percent probability of a U.S. recession — a scenario that would weigh on demand."

Oil on Tuesday was also supported by data from the Energy Information Administration showing that demand for U.S. crude and petroleum products rose 178,000 barrels per day (bpd) in November to 20.59 million bpd, the highest since August.

However, following Tuesday's trading market sources said figures from the American Petroleum Institute show that that U.S. crude oil and fuel inventories rose last week; the EIA will disclose official findings on Wednesday.

Meanwhile, a Reuters survey released Tuesday found that output from the Organization of the Petroleum Exporting Countries (OPEC) fell in January: the cartel pumped 28.87 million bpd, down 50,000 bpd from December.

By contrast, output from OPEC and allies (including Russia), increased for most of 2022 as demand recovered from government imposed Covid lockdowns.

The dip in output was attributed to many producers - notably Nigeria and Angola - lacking the capacity to pump at levels agreed upon by OPEC members.