The Brent crude benchmark opened slightly lower on Tuesday as the U.S. dollar strengthened and traders waited for cues from the U.S. Federal Reserve meeting minutes, after optimism over demand amid tightening supplies drove prices higher.
Brent crude was down 59 cents, or 0.5%, at $83.57 a barrel on Tuesday. U.S. West Texas Intermediate crude (WTI) for March, which expires on Tuesday, was up 78 cents, or 1.02%, at $77.12 at 0146 GMT.
WTI futures did not settle on Monday because of a public holiday in the United States. The WTI April contract, currently the most active, was up 52 cents, or 0.68% at $77.07.
“The U.S. dollar strengthened and pressed on the oil price in the Asian session today, causing a pullback in the oil markets from yesterday’s rebound,” said Tina Teng, an analyst at CMC Markets.
Traders are awaiting the minutes of the latest Federal Reserve meeting, due on Wednesday, as data on core inflation has raised the risk of interest rates remaining higher for longer.
With China’s oil imports likely to hit a record high in 2023 and demand from India, the world’s third-biggest oil importer, surging amid tightening supplies, all eyes are now on monetary policy in the world’s largest economy and biggest oil consumer.
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Analysts say oil prices could rise in the coming weeks because of undersupply and a demand rebound, despite near-term hindrances such as U.S. interest rate hikes.
“Chinese demand for Russian crude is back to the levels seen at the beginning of the war in Ukraine,” said Edward Moya, an analyst at OANDA.
“The West will try to pressure China and India from seeking alternative sources, which should keep the oil market tight,” Moya said.
Russia plans to cut oil production by 500,000 barrels per day (bpd), equating to about 5% of its output, in March after the West imposed price caps on Russian oil and oil products.
“Despite the short-term price action to the U.S. excessive inventory build from last week, oil markets still face an undersupply issue due to China’s reopening and upcoming Russia’s output cuts,” CMC’s Teng said.
