Oil claws back some losses, but strong dollar caps gains

The pattern of oil barrels is seen in front of the rising stock market chart in this illustration, July 24, 2022. REUTERS/Dado Ruvic/Illustration

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MELBOURNE, Sept 26 (Reuters) – Oil prices edged higher on Monday in early trading after hitting an eight-month low last week, weighed down by the stronger U.S. dollar and fears that big rate hikes of interest globally trigger a recession and affect fuel demand.

The dollar index hit a new 20-year high on Monday, capping oil price gains.

Brent crude futures were up 17 cents, or 0.2%, at $86.32 a barrel at 01:16 GMT, while US West Texas Intermediate (WTI) crude futures were up 21 cents, or 0.3%, to $78.95 a barrel. Both contracts fell around 5% on Friday.

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Analysts said crude should find some support as Russia builds up troops for the war against Ukraine and European Union sanctions against Russian oil are expected to come into effect in December.

“That’s really the big question mark for oil in the forecast for the next few quarters – how do the weaker demand projections weigh against EU sanctions,” said Commonwealth Bank analyst Vivek Dhar. , which expected Brent to return to around $100 a barrel in the fourth quarter. .

“It will always be difficult for the market to find that oil to replace Russian supply,” Dhar said.

With prices falling, attention will turn to what the Organization of the Petroleum Exporting Countries and its Russian-led allies, collectively called OPEC+, could do at their Oct. 5 meeting, after agreeing to cut slightly production at their last meeting.

“The sell-off could see OPEC step in again,” analysts at ANZ Research said in a note, highlighting remarks by Nigerian Oil Minister Timipre Sylva that OPEC would consider production cuts as prices the current ones were hurting the budgets of some members.

But given that OPEC+ is producing well below its production target, any announced cuts are unlikely to have much, if any, impact on actual supply.

“I don’t think it’s going to be a game changer,” Dhar said.

Last week’s data showed OPEC+ missed its production target of 3.58 million barrels per day in August, a bigger shortfall than the previous month. Read more

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Reporting by Sonali Paul in Melbourne; Editing by Ana Nicolaci da Costa

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