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Oil prices edged higher on Tuesday, recouping some of the losses from the previous session, as traders focused on supply cuts by the world’s biggest oil exporters Saudi Arabia and Russia and a weaker dollar.
Brent crude futures rose 23c, or 0.3%, to $77.92 a barrel by 1.53am GMT, and US West Texas Intermediate crude was up 32c, or 0.4%, at $73.31.
Prices had eased 1% on Monday on higher expectations that further US interest rate hikes are coming and as investors booked profits after last week’s 4.5% rise.
Supply cuts by the world’s biggest oil exporters Saudi Arabia and Russia set for August helped to lift the benchmark prices, which were also supported as the US dollar fell to a two-month low. A weaker dollar makes crude cheaper for holders of other currencies and often boosts oil demand.
“Oil has found a floor and the only thing that could break that is if US inflation is scorching hot and the Fed is forced to tighten this economy into a recession,” said Edward Moya, an analyst at Oanda.
While central bank officials said the US Federal Reserve is likely to need to raise interest rates further to bring down inflation, markets took comfort from indications the officials also think the current monetary policy tightening cycle is getting close to an end.
Energy traders are also anticipating that China will do more to support its economic recovery, Moya said.
Any weak economic forecasts by US banks kicking off their earnings season, however, could weigh on prices, he said.
Saudi Arabia last week said it would extend its 1-million barrels a day cut at least to August, and Russia said it would cut its oil exports next month by 500,000 barrels a day.
Traders were also looking ahead to US crude inventory data due later on Tuesday from industry group American Petroleum Institute. Analysts expect a build of 200,000 barrels.
Investors as well awaited the release later this week of US consumer price index data, a key inflation report, and economic reports from China to gauge the outlook for demand.
