(RTTNews) – Crude oil prices rose slightly on Tuesday as reports of excess supply flooding the market in the coming months raised traders’ concerns amid forecasts for weaker oil demand.
WTI crude oil for November delivery was last seen trading up $0.02 (or 0.03%) at $61.71 a barrel.
OPEC+ on Sunday (following its virtual meeting) announced a collective oil production increase of 137,000 barrels per day from next month. The news comes in contrast to previous reports which said the alliance was planning to increase production more aggressively.
As the increase is much lower than previous reports of up to 150,000 bpd, the group is clearly exercising caution given its forecast global supply glut through the fourth quarter of 2025 and into next year.
The production increase planned by OPEC+ now stands at more than 2.7 million barrels per day, or about 2.5% of global demand. The group has struggled to fully achieve targets as it has only been able to reach 75% of its planned growth.
So far, storage by China and demand for summer fuel have absorbed a large portion of the excess supply.
With the summer driving season concluding and the autumn harvest ending in the Northern Hemisphere, as well as an increase in supply from non-OPEC producers (the US, Brazil and Guyana), traders are wary of growing surpluses in the coming months.
Late last month, Iraq resumed crude oil exports from Kurdistan to Turkey, allowing the flow of 180,000 to 190,000 bpd of crude. The resumption came amid strong US pressure as the US seeks to make oil exports sustainable in the face of competition from Iran.
The recent drone attack by Ukraine on Russia’s Kirishi oil refinery has forced Russia to halt its most productive distillation unit, resulting in a temporary tightening as recovery of the plant could take about a month.
Ukraine had asked the US to sell Tomahawk missiles (with a range of 2,500 km) to the EU. However, US President Donald Trump has said he would like to know about Ukraine’s plans before supplying the arsenal.
Traders believe that heavy sanctions imposed on Russia by the US and Western countries may impact Russian oil prices. Furthermore, any direct military intervention by the US could provoke Russia, leading to serious tensions, which could lead to disruption of oil and energy supply chains.
Meanwhile, Reuters reported that China is building new oil storage sites this year and next to store crude oil. The world’s largest crude oil importer plans to build 11 new storage sites with a combined capacity of 169 million barrels. Using stable low prices, China has been buying more crude oil for several months. Worth noting is that the country does not have a practice of reporting its inventory numbers.
While Goldman Sachs sees a global supply overhang at 1.9 million barrels per day, the Paris-based International Energy Agency predicts a record overhang of up to 3 million barrels per day.
The government shutdown in the US entered its seventh day today. The shutdown has made key economic data releases unavailable to investors as well as the US Federal Reserve.
The Fed relies on inflation data and employment numbers to plan its monetary policy decisions.
Despite the lack of reliable data, markets are expecting a 25-basis-point rate cut at the Fed’s upcoming October 28-29 meeting.
Oil is a dollar-denominated commodity, fluctuations in the value of the dollar due to Fed decisions can affect oil prices.
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