Oil prices see-sawed on Tuesday between a weaker dollar and China pushing ahead with its zero-Covid policy, which raises concerns about lower fuel demand from the world's second-largest economy and the US reportedly considering a release of as much as 15 million barrels of crude from its emergency stockpile.
Oil edged lower as the prospect of additional supply from strategic reserves eased concerns of a tight market heading into the winter season.
Brent, the benchmark for two-thirds of the world’s oil, was trading 1.80 per cent lower at $89.97 a barrel at 11.27pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was down 3.10 per cent at $82.81 a barrel.
Oil prices had climbed in the morning trading as the US Dollar Index, a measure of the value of the greenback against a weighted basket of major currencies, was at a near one and half week low on the UK’s reversal of its tax cuts, which resulted in the British pound rising by as much as 1.4 per cent against the dollar on Monday.
But concerns about an economic slowdown and media reports that the Biden administration is considering releasing between 10 million to 15 million barrels of oil from US strategic reserves weighed on the market with prices slipping mid-day before reversing course again.
“The sentiment from the Communist Party Congress in China seems to support still-restrained activity, and thus weaker oil demand in the short-run,” Edward Bell, senior director of market economics at Emirates NBD, said in a research note on Tuesday.
On Sunday, China’s President Xi Jinping hailed the country’s zero-Covid policy as a major achievement during his opening address to the Chinese Communist Party Congress.
The policy had “protected the people’s health and safety to the greatest extent possible”, Mr Xi said.
Meanwhile, Opec+ members have stepped up their defence of the oil supergroup’s 2 million-barrel-per-day output cut. The production cut by the 23-member alliance that is led by Saudi Arabia and Russia, drew criticism from the White House earlier this month.
Algerian Energy Minister Mohamed Arkab called the decision a “purely technical” response to the international economic situation.
“The October 5 agreement, which was unanimously ratified by the countries of the Declaration of Cooperation in Vienna, is a purely technical response based on purely economic considerations,” Mr Arkab said in a statement to the Algerian Press Service.
Bahrain's ministry of foreign affairs expressed absolute solidarity with Saudi Arabia and “its refusal to politicise the Opec+ decision” on oil production cuts.
Several other Opec-member countries have also supported the group’s decision, including the UAE's Suhail Al Mazrouei, Minister of Energy and Infrastructure.
“I would like to clarify that the latest Opec+ decision, which was unanimously approved, was a pure technical decision, with no political intentions whatsoever,” Mr Al Mazrouei said in a tweet on Monday.
On Sunday, Oman’s Energy Ministry said that Opec+ decisions were based on purely economic considerations and the realities of supply and demand in the market.
“The recent decision of Opec+ to cut production is in line with its previous decisions in terms of its reliance on market data and its variables, which was important and necessary to reassure the market and support its stability,” the Omani ministry tweeted.
Both Opec and the International Energy Agency (IEA) have slashed their 2022 and 2023 oil demand forecasts, citing rising inflation, Covid-19 curbs in China and the possibility of a recession in some countries.