Oil prices finished higher Monday, giving up early losses that had led the global crude benchmark to dip below $90 a barrel for the first time in more than a week.
Investors fretted over tight supplies of oil and oil products and weighed prospects for demand, ahead of an expected decision by the Federal Reserve this week to deliver another jumbo rate hike.
West Texas Intermediate crude for October delivery
rose 62 cents, or 0.7%, to settle at $85.73 a barrel on the New York Mercantile Exchange after trading as low as $82.10. The October contract expires at the end of Tuesday’s trading session. The most active November contract
added 60 cents, or 0.7% to $85.36.
Back on Nymex, October gasoline
added 2% to $2.4641 a gallon, while October heating oil
climbed by 4.4% to $3.3108 a gallon — the largest one-day percentage gain in more than three weeks, according to Dow Jones Market Data.
October natural gas
declined by nearly 0.2% to $7.752 per million British thermal units.
The market is “waking up to realize” that distillate supplies, which include heating oil, are so tight that there’s little room for any disruptions, ahead of the winter heating season, Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
In a daily report early Monday, he had said that “short-term demand concerns are going to face the reality that inventories are still too tight going into winter,” and that the situation between Russia and Ukraine is still putting supplies of energy to Europe at risk.
WTI fell 1.9% last week, while Brent dropped 1.6%, with analysts tying weakness to fears of a sharp global economic slowdown or recession as major central banks, particularly the Federal Reserve, aggressively raise interest rates in a bid to bring down stubbornly high inflation.
The Fed is expected Wednesday to deliver another supersize 75 basis point, or 0.75 percentage point, rise to the fed-funds rate when it concludes a two-day policy meeting. Some investors and analysts say there’s the outside possibility of a 100-basis-point move.
The Fed’s hawkish tone has been driving the dollar higher. The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was little changed Monday at 109.771, but up around 1% month to date and trading near a 20-year high set last week.
Meanwhile, news reports said China has lifted its lockdown of Chengdu, following two weeks of heavy restrictions. That eased some worries about a slowdown in energy demand, said Flynn.