Oil futures ended modestly lower Tuesday, pulling back after a strong July performance that saw the U.S. benchmark close the previous session at its highest in more than three months.
Price action
-
West Texas Intermediate crude for September delivery
CL00,
-2.63% CLU23,
-2.63% CL.1,
-2.63% ,
fell 43 cents, or 0.5%, to end at $81.37 a barrel on the New York Mercantile Exchange. -
October Brent crude
BRN00,
-2.36% BRNV23,
-2.36% ,
the global benchmark, declined 52 cents, or 0.6%, to settle at $84.91 a barrel on ICE Futures Europe. -
Back on Nymex, September gasoline
RBU23,
-3.47%
fell 0.8% to close at $2.873 a gallon, while September heating oil
HOU23,
-1.34%
rose 1.3% to $3.023 a gallon. -
September natural gas
NGU23,
-3.52%
dropped 2.8% to finish at 2.56 per million British thermal units.
Market drivers
Both WTI and Brent remained Tuesday at their highest since April 14, after logging strong July gains. Crude erased year-to-date losses last month, buoyed by supply cuts by the Organization of the Petroleum Exporting Countries and its allies, including Russia. That includes a voluntary reduction of 1 million barrels a day by Saudi Arabia for July and August, that’s expected to be rolled over into September.
Bulls also give credit to the expectation that major central banks are near the end of a series of interest rate hikes to combat inflation. Investors have also had positive reactions to measures announced by Chinese authorities aimed at boosting the economy after a lackluster response to the lifting of strict COVID curbs in 2022.
A firmer tone for the U.S. dollar was blamed for weakness Tuesday. A stronger dollar can be a negative for commodities priced in the unit, making them more expensive to users of other currencies. The ICE U.S. Dollar Index
DXY,
rose 0.4%.
“The oil price rally is ready for a break as U.S. stocks soften and the dollar firms up,” said Edward Moya, senior market analyst at Oanda,in a note.
“August is off to a slow start for energy traders as the outlook on demand could face rising prices,” he said, but added that the market will likely remain tight even if oil giants start delivering large price increases.
“Oil remains one of the most attractive trades and buyers will likely emerge on every dip.” he said.
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