Oil futures: Crude rallies amid geopolitical tensions, weaker dollar
Quantum Commodity Intelligence - Crude oil futures were trending higher towards the market close Tuesday, as sentiment swung back to the upside amid a weaker dollar and investor appetite for riskier assets.
Front-month January ICE Brent futures were trading at $93.84/barrel (1930 GMT), compared to the day's range of $91.53-$95.77/b and Monday's settle of $93.14/b.
At the same time, Dec22 NYMEX WTI was trading $86.90/b versus Monday's settle of $85.87/b.
Oil prices rebounded as the dollar index retreated around 0.5% Tuesday to a three-month low of under 106.50 points, making dollar-denominated oil cheaper for importers.
Geopolitical tensions were also raised amid reports two people were killed in Poland after stray rockets landed in the NATO state as a result of Russia's mass bombardment of Ukrainian cities.
Furthermore, reports that crude supplies via the Druzhba pipeline had been impacted after a Russian missile struck a crucial Ukrainian electricity substation added to the price volatility.
Crude spent most of the session in the red as the rapid growth in Covid cases outweighed hopes that Beijing will relax restrictions in the new year.
China officially logged more than 17,700 new coronavirus infections on Monday, with many major cities – including Guangzhou and Beijing – witnessing a surge in cases, leading to more restrictions and neighbourhood lockdowns, reported the South China Morning Press Tuesday.
"Rolling lockdowns across heavily populated areas in China penalize mobility and oil demand even more than economic activity," said Stephen Innes, managing partner at SPI Asset Management.
China's economy continued its mixed recovery as October industrial production rose in line with expectations, but retail sales "fell sharply" due to increased coronavirus disruptions, data released on Tuesday showed.
Industrial production, a gauge of activity in the manufacturing, mining and utilities sectors, rose by 5% in October, year on year, the National Bureau of Statistics (NBS) confirmed. But retail sales fell by 0.5% in October, below the expectations of a rise of 1.8% and down from 2.5% growth in September.
IEA
Sentiment was further rocked Tuesday after the IEA said demand growth will slow to 1.6m bpd in 2023, down from 2.1m bpd this year, as mounting economic headwinds impede growth, although the agency warned over Russian shortfalls and a potentials diesel crunch.
This came after OPEC again cut its demand outlook for both this year and next in its latest monthly report, which some analysts believe could lead to a further revision of output quotas when the group convenes in early December.
"Given the sizeable supply cuts from November through until the end of next year, OPEC supply will still be lower than demand for OPEC oil over 2023," said Warren Patterson, head of ING's commodity research.
On a more positive note for crude, French investment bank Societe Generale said Tuesday that Brent crude oil futures are set to hit $108/b in Q2 next year as China exists its zero-Covid policy, while EU sanctions will take off 1.5m bpd of Russian supplies.
Meanwhile, workers at the 400,000 bpd Rotterdam oil refinery have started a work-to-rule job action as part of the first set of industrial action after its ultimatum to BP lapsed on Monday lunchtime, the Dutch unions told Quantum.
As a result, November gasoil cracks in Europe climbed $2/b Monday, moving back above $40/b.
