(Bloomberg) -- Oil steadied as traders assessed near-term supply tightness in the crude market and broad appetite for risk assets including commodities.
West Texas Intermediate held above $84 a barrel after dropping in the prior two sessions. The Organization of Petroleum Exporting Countries and its allies have agreed to curb supplies from November, ahead of European Union sanctions on Russian oil flows the next month. Key market time spreads -- a gauge of tightness -- remain in backwardation, a bullish pattern.
Crude has swung in recent sessions along with broader market trends and shifts in the dollar. The US currency was slightly weaker on Tuesday, making commodities cheaper for overseas buyers. A fifth of S&P 500 companies have posted third-quarter earnings so far, with more than half topping estimates.
Oil is on course for the first monthly gain since May, although prices have shed the advances that followed Moscow’s invasion of Ukraine. Investors are weighing concerns about the impact of global economic slowdown and tighter monetary policy against the scope for a reduction in supply. They’re also awaiting further details on a US-led plan to cap the price of Russian oil.
“While the easing US dollar has provided a positive catalyst for oil prices, along with the improved risk environment, the demand outlook remains a key overhang,” said IG Asia Pte market strategist Yeap Jun Rong.
A poor economic outlook for China, the top crude importer, has added to headwinds. The country’s third-quarter GDP showed a mixed recovery, with strict Covid-19 controls and a property slump continuing to weigh on growth and, hence, oil demand. On Tuesday, the offshore yuan fell to a fresh record low after the People’s Bank of China loosened its grip on its tightly controlled currency fixing by setting the rate at the weakest level in 14 years.
Among widely watched time spreads, the difference between Brent’s first and second-month contracts was $1.98 a barrel in backwardation, compared with $1.43 a week ago, and 88 cents two months ago. Similarly, the gap between the contract for this coming December and the final month of 2023 is well above $12, more than twice the level in mid-August.