Oil prices edged higher on Tuesday following steep losses the previous day, as bargain hunters saw an opportunity in the price dip ahead of key central bank decisions later this week.
Brent crude rose 0.8% to $72.44 a barrel while WTI crude gained 0.5% to $67.47 a barrel. Both benchmarks plunged almost $3 on Monday amid concerns about oversupply and weakening demand growth.
The slight rebound on Tuesday came after some traders took advantage of the cheaper prices and others paused for more clarity before the Federal Reserve's policy decision this week. The Fed is widely expected to raise rates by another half point, which could support the dollar and weigh on dollar-denominated commodities like oil.
Supply risks remain elevated, with Goldman Sachs trimming its oil price forecasts and raising supply projections for Russia, Iran and Venezuela due to higher-than-expected production from those nations. Meanwhile, US crude inventories unexpectedly fell last week but concerns persist over sluggish fuel demand in China.
OPEC+ recently agreed to slash output by 1.4 million barrels per day for 2024, with Saudi Arabia alone voluntarily cutting a further 1 million bpd from July. However, this does not appear to have fully offset worries about excess supplies in the market.
In summary, oil prices managed small gains on Tuesday but the underlying supply-demand dynamics point to persistent pressures that will challenge the market's ability to rally sustainably in the near term. Much will hinge on this week's key monetary policy decisions.
