By Rowena Edwards
LONDON (Reuters) -Oil prices rose on Tuesday, recouping losses from the previous session, as a weaker U.S. dollar offset widening COVID-19 curbs in China that have stoked fears of slowing fuel demand in the world’s second-largest oil consumer.
Brent crude for January delivery rose $1.56, or 1.68%, to $94.37 a barrel at 1429 GMT. The December contract expired on Monday at $94.83 a barrel, down 1%.
U.S. West Texas Intermediate (WTI) crude rose $1.63, or 1.88%, to $88.16 after falling 1.6% in the previous session.
Oil prices rose as the U.S. dollar sank on Tuesday from a one-week high against a basket of major rivals as traders weighed the odds of a less aggressive U.S. Federal Reserve at Wednesday’s monetary policy meeting.
A weaker greenback makes dollar-denominated oil cheaper for buyers holding other currencies, boosting demand for the commodity.
The Brent and WTI benchmarks both registered monthly gains in October, their first since May, after the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, cut their targeted output by 2 million barrels per day (bpd).
The OPEC+ cuts and record U.S. oil export data also support oil price fundamentals, said CMC Markets analyst Tina Teng.
Tamas Varga of oil broker PVM, meanwhile, said that dwindling oil supply, a possible halt to release of oil from the Strategic Petroleum Reserve (SPR) and reinvigotated oil demand growth could also send crude back above $100 a barrel.
An oil investment lag is sowing seeds for a future energy crisis, OPEC secretary General Haitham Al Ghais said on Tuesday.
OPEC raised its forecasts for world oil demand in the medium and longer term on Monday, saying that $12.1 trillion of investment is needed to meet this demand.
These bullish factors have offset demand concerns raised by COVID-19 curbs that lowered China’s factory activity in October and cut into its imports from Japan and South Korea.
In a further cap to price gains, U.S. crude oil stocks are likely to rise in the week to Oct. 28, a preliminary Reuters poll showed.
The poll was conducted ahead of reports from the American Petroleum Institute due at 4:30 p.m. EDT (2030 GMT) on Tuesday and the Energy Information Administration due at 10:30 a.m. (1430 GMT) on Wednesday.