Oil Rises Minimally In Advance Of OPEC Meeting

But the gains are accompanied by more signs of waning demand: File Image/Pixabay

Oil on Tuesday eked out modest price gains purely on the strength of expectations that the Organization of the Petroleum Exporting Countries (OPEC) meeting tomorrow will not result in any meaningful output increase.

Trading was also impacted by U.S. house speaker Nancy Pelosi's visit to Taiwan, which critics say was pointless and would only intensify tensions with China.

Edward Moya, senior market analyst at Oanda, noted that oil declined the past two months on demand concerns and said, "A global economic slowdown might be happening, but crude prices have come down too far given how tight the physical market remains."

West Texas Intermediate on Tuesday rose 53 cents to settle at $94.42 per barrel, and Brent rose 51 cents to settle at $100.54 per barrel.

Also telling with regard to demand is that Brent's prompt spread (the difference between its nearest two contracts) has narrowed to $2 per barrel as of Tuesday compared to nearly $4 a week ago; this is attributed to concern over the recession and signs of weaker gasoline consumption in the U.S.

Jim Cramer, host of CNBC's 'Mad Money', wrote on Tuesday, "Is oil over? I thought it had staying power here but a chartist who called the WTI crude top at about $110 per barrel, Carley Garner, now says the next stop is $85 to $80 range."

With the bloom off oil's rose and demand declines seemingly inevitable, it was somewhat ironic that Tuesday's news included the disclosure that OPEC – previously criticized for repeatedly refusing to boost output - added 270,000 barrels per day (bpd) in July, with Saudi Arabia accounting for about two-thirds of the increase.

Bloomberg stated, "Saudi Arabia bolstered output by 180,000 bpd to 10.78 million bpd in July, the highest since April 2020, and a level rarely seen in the kingdom's decades as an oil exporter."

Abu Dhabi also raised output to 3.24 million bpd, or 113,000 per day more than permitted under the OPEC deal.

In other oil related news on Tuesday, Ian Bremmer, president of Eurasia Group, told media that while short-term disruptions to Russia from sanctions are less than originally anticipated, the former Soviet Union will suffer a sustained, long-term decline in economic activity to eventually result in a 30 percent-50 percent contraction in Russian GDP from its prewar level.

Yale University analysts added that "Defeatist headlines arguing that Russia's economy has bounced back are simply not factual – the facts are that, by any metric and on any level, the Russian economy is reeling, and now is not the time to step on the brakes."