Oil prices rose more than 1 percent on Tuesday, tracking the stock market higher after a rise in Turkey’s lira quelled fears of emerging market weakness and as market participants focused on lower crude supply from Saudi Arabia and Iran. Brent crude futures for October delivery rose 74 cents to $73.35 a barrel by 11:00 a.m. (1500 GMT) U.S. West Texas Intermediate (WTI) crude futures rose 70 cents to $67.90 a barrel.
Prices rebounded from the previous session’s slide that came as a financial crisis in Turkey sparked fears that possible contagion throughout emerging economies could hurt fuel demand. Turkey’s lira, which crashed to an all-time low against the dollar on Monday, recovered about 5 percent on Tuesday. . U.S. stock indexes broadly gained, supporting oil futures.
“The equities and the U.S. dollar are keying primarily off of the unfolding saga in Turkey and although the lira has posted a significant rebound today, the standoff between Turkey and the U.S. is showing no sign of progress,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note. “Consequently, worries over contagion are apt to increase in the process of reducing risk appetite and renewing downside pressures on oil pricing.”
Also supporting oil prices were concerns over lower global crude supply from top producers. The Organization of the Petroleum Exporting Countries said on Monday that Saudi Arabia had cut production.[nL5N1V431A]
In July, Saudi Arabia told OPEC it cut production by 200,000 bpd to 10.288 million bpd. The market also expects export declines from Iran as Washington re-imposes sanctions on Tehran. But output from non-OPEC countries is rising quickly. OPEC expects oil supply by countries outside the cartel to increase by 2.13 million bpd next year, 30,000 bpd more than forecast last month, with much of the increase coming from new U.S. shale production.
Market participants awaited industry data on Tuesday from the American Petroleum Institute (API) that analysts expect will show that U.S. crude and gasoline inventories fell last week. The data is due to be released at 4:30 p.m. EDT (2030 GMT). Global oil demand is rising, but not as fast as supply.
Analysts say trade disputes between the United States and China as well as turmoil in emerging markets could curb growth and energy demand. China’s economy is showing signs of cooling as the United States prepare to impose tougher trade tariffs, with investment in the first seven months of the year slowing and retail sales softening, data showed. Reuters