Crude oil erased their post-OPEC gains to kick off the holiday-shortened trading week. US and Brent crude prices struggled for direction, while natural gas prices were hammered. Despite tighter supply conditions from the cartel’s decision, investors are still weighing a potential Iran nuclear deal.
October West Texas Intermediate (WTI) crude futures settled down $0.06, or 0.07%, to $86.81 per barrel at 20:01 GMT on Tuesday on the New York Mercantile Exchange. US crude prices had surged more than 3% on Monday before wiping out those gains. Year-to-date, WTI is still up about 15%.
Brent, the international benchmark for oil prices, pared most of its losses on Tuesday. November Brent futures slipped $0.17, or 0.18%, to $92.66 a barrel on London’s ICE Futures exchange. Brent is also up about 15% on the year.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, agreed to slash output by 100,000 barrels per day (bpd). But investors learned that Russia ostensibly was against the decision.
“OPEC isn’t happy to see oil prices ease with the recession talk, and cutting supply suddenly dwarfs the demand side of the problem and should, in theory, reverse the trend back to bullish,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a research note on Monday.
But Carsten Fritsch, commodity analyst at Commerzbank, said in a note that the output cut made “as little difference as the corresponding hike a month ago.”
Still, the cartel is monitoring the demand-side of things, worrying that a global economic slowdown will weigh on crude consumption. Indeed, new lockdown measures were announced in China, a move that would lead to lower imports from the world’s second-largest economy.
Meanwhile, energy analysts are assessing the G7’s decision to install a cap on Russian oil prices. So far, the consensus is that it will not do much since it would require the support of the international community, especially China and India.
But some energy experts continue to assert that there is a bullish case for crude amid tight supplies.
“Energy madness may continue but the risks are still to the upside. We are fighting this battle against the concerns about future demand destruction versus a supply situation that is tight and getting tighter. If the demand destruction is smaller than anticipated, oil prices are going to go on an incredible ride. The bear case is that we’re headed towards economic catastrophe. The question for the bears is will oil prices spike before the economy falls apart,” wrote Phil Flynn, author of The Energy Report.
In other energy commodities, October natural gas futures tanked $0.743, or 8.46%, to $8.043 per million British thermal units (Btu). October gasoline futures fell $0.0465, or 1.89%, to $2.4171 per gallon. October heating oil futures were flat at $3.5756 a gallon.