Brent, the benchmark for two thirds of the world’s oil, was trading 0.41 per cent higher at $94.82 a barrel at 3.54pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 0.98 per cent at $92.38 a barrel.
On Monday, Brent settled 0.53 per cent higher at $94.43 a barrel, while WTI closed up 0.78 per cent at $91.48 a barrel.
“This oil rally has been relentless and I'm not seeing any signs of exhaustion yet,” said Craig Erlam, senior market analyst at Oanda.
“Saudi Arabia and Russia have been very effective in squeezing a tight market that much further to create a situation in which oil prices are trading well above the zone they've been stuck around for much of the year,” Mr Erlam said.
Brent crude has gained roughly a third in value since falling to a low of $71.84 in June, with the International Energy Agency predicting a tighter-than-anticipated crude market on Opec+ cuts as China, the world’s second-largest economy, introduces reform measures to revive growth.
Opec+ is not aiming for price control through its output cuts, but less volatility in the market, Saudi Arabia’s Energy Minister said on Monday.
The group wants to be “proactive” and “pre-emptive”, Prince Abdulaziz bin Salman was quoted as saying at the World Petroleum Congress in Calgary, Alberta.
The minister also said there was continuing uncertainty regarding Chinese demand, European economic growth, and interest rate actions.
The Fed is set to meet today and tomorrow and is widely expected to maintain its current interest rates despite persistent inflation in the world’s largest economy.
“The US policymakers will certainly opt for a ‘hawkish pause’. The Fed will likely revise its growth expectations significantly higher on the back of resilient consumer spending and solid growth,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“A major part of disinflation since last summer was due to waning post-Covid supply issues that led to higher supply, hence slower price growth. But the improvement in supply could be coming to an end, and oil prices are rising,” she said.
After pausing its tightening cycle in June, the Fed increased its policy rate in July for the 11th time since March 2022, as it aims to bring inflation down to its 2 per cent target range.
Fed chair Jerome Powell previously warned that the central bank may not be done raising interest rates, arguing more proof is needed to show a cooling economy.
Higher interest rates dampen economic growth, lowering crude demand.
US oil output from large shale-producing regions is set to fall for a third month in a row in October, the US Energy Information Administration said in its monthly drilling productivity report on Monday.
US crude production is expected to drop to 9.39 million barrels per day in October from 9.43 million bpd this month, EIA data showed.
Swiss lender UBS expects Brent to trade in the range of $90-$100 a barrel over the coming months, before ending the year at $95 a barrel.
“Financial investors have added exposure to crude oil as a result of the tightening oil market and to benefit from higher roll returns, with the futures curve now more strongly downwards sloped,” UBS said.
“While we expect only modest upside from current prices, we reiterate our recommendations for risk-taking investors to add long exposure via first-generation indexes or longer-dated Brent contracts, or to sell Brent’s downside price risks,” the bank said.