Oil broadly stable as tight supply counters falling U.S. markets

© Reuters. FILE PHOTO: A GOI company truck is seen next to fuel pumps at a Cepsa petrol station in Cuevas del Becerro, Spain, November 29, 2021. REUTERS/Jon Nazca/File Photo

By Shadia Nasralla

LONDON (Reuters) -Oil prices were broadly stable on Tuesday as bullish signals from a tight supply picture were countered by falling Wall Street equities and a possible U.S. rate hike, which could weigh on risk assets such as oil.

Brent crude futures were up 23 cents, or 0.3%, at $86.50 a barrel at 1249 GMT. U.S. West Texas Intermediate (WTI) crude futures were 3 cents lower at $83.28 a barrel.

World equities, which often move in tandem with oil, are set for their biggest monthly drop since the COVID-19 pandemic hit markets in March 2020. U.S. oil futures erased earlier gains as Wall Street opened, with equities falling. [MKTS/GLOB] [LIVE/]

Still both WTI and Brent, fresh from hitting seven-year highs last week, are heading for monthly gains of over 10%.

Indicating current tight supply, Brent's six-month spread is in backwardation as front month delivery futures trade at a premium of around $5 a barrel.

Ahead of an expected U.S. Federal Reserve interest rate decision on Wednesday, where a hike might weigh on prices, geopolitical risks involving oil and gas producer Russia have been supporting oil prices.

NATO said on Monday it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets, in what Russia denounced as Western "hysteria" in response to its build-up of troops on the Ukraine border.

In the Middle East, Yemen's Iran-aligned Houthi movement launched a missile attack on Monday on a base in the United Arab Emirates hosting the U.S. military, which was thwarted by U.S.-built Patriot interceptors, U.S. and Emirati officials said.

Also fuelling supply concerns, OPEC+, which groups the Organization of the Petroleum Exporting Countries (OPEC) with Russia and other producers, is struggling to hit its targeted monthly output increase of 400,000 barrels per day.

Lower U.S. oil inventories are also providing support, with crude stocks at Cushing in Oklahoma at the lowest for the time of year since 2012.