BENGALURU, Jan 31 (Reuters) – Oil prices closed steady on Tuesday after recovering from a near three-week low, drawing support from a weakening dollar and on data showing that demand for US crude and petroleum products rose in November.
The more active second-month Brent contract settled at USD 85.46 a barrel, up 96 cents or 1%, while the US West Texas Intermediate crude futures settled at USD 78.87 a barrel, up 97 cents or 1.3%.
More volatility on the day of expiration kept the front-month contract under pressure as traders closed positions, said Mizuho analyst Robert Yawger. The front-month contract settled at USD 84.49 a barrel, down 41 cents.
During the session, front-month Brent and WTI futures touched their lowest in almost three weeks as traders worried about prospects for further interest rate increases and abundant flows of Russian crude.
The Brent April futures and US front-month WTI gained after the US Energy Information Administration reported that demand for US crude and petroleum products rose 178,000 barrels per day (bpd) in November to 20.59 million bpd, the highest since August.
Crude benchmarks were also supported by a weaker US dollar, UBS analyst Giovanni Staunovo said. This makes dollar-denominated crude cheaper for foreign buyers.
The dollar index turned negative after US data showed labor costs increased at their slowest pace in a year in the fourth quarter as wage growth slowed, bolstering expectations of the Fed slowing its interest rate increases.
Investors expect the Fed to raise rates by 25 basis points on Wednesday, with increases of half a percentage point by the Bank of England and European Central Bank the following day.
An OPEC panel is likely to recommend keeping the group’s output policy unchanged when it meets on Wednesday, delegates told Reuters on Monday.
However, Tuesday’s weakness in front-month Brent prices may cause concern in the group, Yawger said. This widened the contango in the market, which occurs when futures prices show a commodity’s price is expected to be much higher in the future.
A Reuters survey shows 49 economists and analysts expect Brent crude to average more than USD 90 a barrel this year, the first upward revision since a poll in October, with gains likely driven by demand from top consumer China.
After settlement, market sources said the American Petroleum Institute reported that US crude oil and fuel inventories rose last week. The US Energy Information Administration will release official stockpiles data on Wednesday.
Preliminary numbers by the API indicated a 6.3 million-barrel increase in crude stocks, which if confirmed by the EIA would be much higher than the 400,000-barrel rise forecast by analysts in a Reuters poll.
(Reporting by Shariq Khan; Additional reporting by Rowena Edwards, Swati Verma, Trixie Yap; Editing by David Goodman, Will Dunham and David Gregorio)
This article originally appeared on reuters.com