Oil prices firmed on Thursday, erasing earlier losses, on indications that OPEC+ might cut output, though a stronger dollar and weak economic outlook kept a lid on gains.
Brent crude futures rose 52 cents, or 0.6%, to $89.84 a barrel by 1027 GMT and U.S. crude futures rose by 52 cents, or 0.6%, to $82.67.
Leading members of OPEC+ have begun discussions about an oil output cut when they meet on Oct. 5, two sources from the producer group told Reuters.
One source from the Organization of the Petroleum Exporting Countries (OPEC) said a cut looks likely but gave no indication of volumes.
Reuters reported this week that Russia is likely to propose that OPEC+ reduces oil output by about 1 million barrels per day (bpd).
Hurricane Ian also provided price support. About 157,706 bpd of oil production was shut down in the Gulf of Mexico as of Wednesday, according to the Bureau of Safety and Environmental Enforcement.
Both crude benchmarks had rebounded in the previous two sessions from nine-month lows earlier in the week, buoyed by a temporary dive in the dollar index and a larger than expected U.S. fuel inventory drawdown.
However, the dollar index rose again on Thursday, dampening investor risk appetite and stoking fears recession fears, sending both crude contracts lower earlier in the session.
The Bank of England said it is committed to buying as many long-dated government bonds as needed between Wednesday and Oct. 14 to stabilise its currency after the British government’s budget plans announced last week sent sterling tumbling.
Goldman Sachs cut its 2023 oil price forecast on Tuesday, citing expectations of weaker demand and a stronger U.S. dollar, but said global supply disappointments reinforced its long-term bullish outlook.
In China, the world’s biggest crude oil importer, travel during the forthcoming week-long national holiday is set to hit its lowest level in years as Beijing’s zero-COVID rules keep people at home while economic woes curb spending.
Citi economists have lowered their China GDP forecast for the fourth quarter to 4.6% growth year on year from 5% expected previously.
“Stringent zero-COVID measures and a weak property sector continue to cloud growth prospects,” Citi analysts wrote on Wednesday.