Oil Ekes Out Gains Amid Higher Dollar And Concern Over OPEC Policy

Meanwhile, Iraq offers 30 oil and gas projects for international bid: File Image/Pixabay

Despite a strong U.S. dollar that usually discourages investors from buying crude, oil trading on Tuesday was volatile and wound up ending higher, as market tightness was weighed against economic concerns.

Brent settled up21 cents at $90.92 per barrel, while West Texas Intermediate settled up 41 cents at $89.23.

Traders were also said to have grappled with the uncomfortable reality of why the  dollar has risen in recent days: because the Federal Reserve indicated that it will leave borrowing costs higher for longer, which in turn is fuelling demand worries.

Russia was said to haveadded to traders' concerns by debating whether to lift its overseas diesel export ban; a final decision is expected soon.

Also on Tuesday came speculation that the Organization of the Petroleum Exporting Countries (OPEC) will not ease their ongoing production cuts after all, when ministers from a monitoring panel meet on Wednesday to discuss the matter.

Delegates from the Joint Ministerial Monitoring Committee told media that they do not expect to recommend any changes despite the increasingly tight oil market and fears of demand destruction if prices stay above $90.

For his part, Haitham Al Ghais, secretary general of OPEC, told media that rising demand for oil will keep crude prices elevated, and he cited expectations that demand will rise by around 2.4 million barrels per day (bpd) this year compared to 2022, and by another 2 million bpd next year.

Warren Patterson, head of commodities strategy at ING Groep, said of Tuesday's trading,  "Oil's downward move has very little to do with fundamentals and all to do with rising Treasury yields and the stronger U.S. dollar….I still think oil has some room to move higher: fundamentally, it is looking constructive."

In other oil related news on Tuesday, Al-Hakam I. Al-Neama, the head of the exploration contracts division at Iraq's oil ministry, disclosed that his country is inviting international companies to bid for 30 new oil and gas projects in two licensing rounds until January 2024.

Despite being rich in oil and gas, Iraq does not have gas processing plants and has to import gas from neighboring countries, including Iran, for fuel at its power plants.