WASHINGTON (dpa-AFX) - Crude oil crept slightly higher on Tuesday as reports of excess supply flooding the market in the coming months against forecasts of weakening oil demand have increased traders' concerns.
WTI Crude Oil for November delivery was last seen trading up by $0.02 (or 0.03%) at $61.71 per barrel.
OPEC+ on Sunday announced (after their virtual meeting) a collective oil production increase by 137,000 barrels per day, beginning next month. This news came in contrast to earlier reports stating that the alliance was planning to increase output more aggressively.
As the increase is far less than earlier reports of up to 150,000 bpd, the group is apparently exercising cautiousness in the wake of predictions for global supply excess in the fourth quarter of 2025 and through next year.
The planned output increases by OPEC+ now stand at more than 2.7 million barrels per day which is roughly 2.5% of global demand. The group has struggled to fully achieve the target as it could reach only 75% of its planned increase.
So far, stockpiling by China and summer fuel demand have absorbed a lot of the additional supply.
With the summer driving season closing and northern hemisphere autumn harvest ending, along with the boost in supply from non-OPEC producers (U.S., Brazil, and Guyana), traders are wary of a growing surplus in the coming months.
At the end of last month, Iraq resumed its crude oil exports to Turkey from Kurdistan, allowing 180,000 to 190,000 bpd of crude to flow. This resumption came amid strong U.S. pressure as the U.S. wants to make oil exports long-lasting in competition to Iran.
A recent drone attack on Russia's Kirishi oil refinery by Ukraine has forced Russia to halt its most productive distillation unit, resulting in temporary tightening as the plant's recovery could take around a month's time.
Ukraine had asked the U.S. to sell Tomahawk missiles (having 2,500 km range) to the EU. However, U.S. President Donald Trump has stated that he would want to know of Ukraine's plans before supplying the arsenal.
Traders feel that heavy sanctions by the U.S. and the West on Russia could weigh on the prices of Russian oil. In addition, any direct military intervention by the U.S. could provoke Russia, which could lead to a severe escalation, disrupting oil and energy supply chain.
Meanwhile, Reuters reported that China is building new oil storage sites this year and next for stockpiling crude oil. The world's largest importer of crude oil is planning to build 11 new storage sites with a combined capacity of 169 million barrels. Making use of the stable low prices, China has been buying more crude for months now. Of note, the country does not have the practice of reporting its inventory numbers.
While Goldman Sachs sees the global supply overhang at 1.9 million barrels daily, the Paris-based International Energy Agency has predicted a record overhang of as much as 3 million barrels daily.
In the U.S., the government shutdown entered its seventh day today. The closure has rendered key economic data releases unavailable to investors as well as for the U.S. Federal Reserve.
The Fed relies on inflation data and employment numbers to plan their monetary policy decision-making.
Despite the lack of reliable data, markets are pricing in a 25-basis-point rate cut at the Fed's upcoming October 28-29 meeting.
Oil being a dollar-denominated commodity, swings in the value of the dollar due to Fed's decisions could impact oil prices.
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