Brent oil futures rose by 0.5% to $87.89. January futures for US West Texas Intermediate (WTI) crude rose 0.4% to $80.34 per barrel.
Both crudes fell more than $5 a barrel on Monday, hitting 10-month lows after the Wall Street Journal (WSJ) reported that an increase to 500,000 bpd would be considered at the OPEC+ meeting on Dec. 4.
Prices quickly recovered fully after Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said the kingdom was sticking to output cuts and was not discussing a potential output increase with other OPEC producers, denying a WSJ report.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) recently cut production targets, and de facto leader Saudi Arabia’s energy minister said this month that the group would remain cautious on oil production amid uncertainty about the global economy.
The pullback of the US dollar was the main factor supporting oil prices, according to CMC Markets analyst Tina Teng. A weaker dollar makes oil cheaper for holders of other currencies.
Concerns about oil demand amid the U.S. Federal Reserve’s interest rate hikes and China’s tough lockdown policies are outweighing potential positive price factors such as the European Union’s embargo on Russian oil, which is set to begin on Dec. 5, Stephen Innes, managing partner of SPI Asset. According to the ban, in response to Russia’s invasion of Ukraine in February, the import of petroleum products will cease.
The G7 plan, also due to take effect on December 5, would allow transport service providers to help export Russian oil, but only at forced low prices.
“A critical risk to the price cap policy is the possibility of retaliatory measures from Russia, which would turn this into an additional shock to the oil market,” Innes said.
But in the meantime, China’s new nationwide surge in COVID cases has heightened fears about its economy.
Beijing closed parks and museums on Tuesday, and more Chinese cities resumed mass testing. The Chinese capital warned on Monday that it was facing the most serious test of the pandemic and tightened rules for entering the city.