Forexpros – Crude oil futures edged higher in volatile trade on Tuesday, erasing earlier losses suffered in the wake of a downgrade to Italy’s credit rating, while easing concerns about oversupply underpinned prices.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in October traded at USD86.38 a barrel during European morning trade, gaining 0.55%.
The October crude contract is due to expire at the end of trading on Tuesday.
Meanwhile, the more actively traded contract for November delivery traded at USD86.54 a barrel, jumping 0.85%. It earlier fell as much as 0.86% to trade at a daily low of USD85.28 a barrel.
Contract expiration often leads to volatile sessions as market participants look to close out positions or reposition their portfolios.
Crude prices came under pressure earlier after ratings agency Standard & Poor’s downgraded Italy’s sovereign credit rating by one notch to A from A+ and kept its outlook on negative.
Prices found support after Organization of the Petroleum Exporting Countries Secretary General Abdullah al-Badri said earlier that oil producers who had increased output to make up for the shortfall in shipments from Libya will reduce production as Libyan output returns to the market.
Wall Street bank JP Morgan Chase said in a report, “Perhaps the most significant of Al-Badri’s comments was the recognition that the members of OPEC will reduce output to accommodate Libyan production as it resumes.”
“This adds weight to our view that OPEC will respond to any risk of oversupply in order to support prices near USD100 a barrel,” the lender said.
Markets were also awaiting fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show stockpiles fell by 1.5 million barrels last week to 344.9 million barrels, the lowest in eight months.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery rose 0.65% to trade at USD109.95 a barrel, up USD23.41 a barrel on its U.S. counterpart.
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