Asharq Al-awsat English https://aawsat.com/english Middle-east and International News and Opinion from Asharq Al-awsat Newspaper http://feedly.com/icon.svg

Oil Prices Slip as Recession Fears Rumble On, Tight Supply Stems Losses

Oil Prices Slip as Recession Fears Rumble On, Tight Supply Stems Losses

Monday, 4 July, 2022 - 06:30
Oil drills are pictured in the Kern River oil field in Bakersfield, California November 9, 2014. REUTERS/Jonathan Alcorn/File Photo

Oil prices fell on Monday, paring gains from the previous session, as fears of a global recession weighed on the market even as supply remains tight amid lower OPEC output, unrest in Libya and sanctions on Russia.


Brent crude futures for September slipped 36 cents, or 0.3%, to $111.27 a barrel at 0300 GMT, having jumped 2.4% on Friday.


US West Texas Intermediate (WTI) crude futures for August delivery dropped 34 cents, or 0.3%, to $108.09 a barrel, after climbing 2.5% on Friday, Reuters reported.


"The recession fears are the primary bearish factor that has capped the surge in oil prices. Rising rates and a plunge in consumer confidence have dented the fuel demand outlook, while data shows that the US petroleum refinery capacity has improved," said CMC Markets analyst Tina Teng.


"In addition, a strong USD also weakens broad commodity markets, including crude prices."


US consumer sentiment dropped to a record low in June despite a marginal improvement in the outlook for inflation, as the Federal Reserve said its commitment to reining in inflation was "unconditional" and increasing concerns of interest rate hikes.


Oil supply concerns still remain, preventing steeper price falls.


"Energy markets remain laden with specific supply risks that makes being short a nervy experience," Commonwealth Bank commodities analyst Tobin Gorey said.


Output from the 10 members of Organization of the Petroleum Exporting Countries (OPEC) in June fell 100,000 barrels per day (bpd) to 28.52 million bpd, off their pledged increase of about 275,000 bpd, a Reuters survey showed.


Declines in Nigeria and Libya offset increases by Saudi Arabia and other large producers, and Libya faces further supply disruption due to escalating political unrest, making the likelihood of OPEC meeting its newly increased production quotas even more unlikely, said ANZ Research analysts in a note.


Libya's exports have dropped to between 365,000 bpd and 409,000 bpd, down about 865,000 bpd compared to normal levels, the National Oil Corp said last week.


In a further hit to supply, a planned strike by Norwegian oil and gas workers this week could cut the country's oil and condensate output by 130,000 bpd.


Editor Picks

Multimedia