Oil prices will fall from Tuesday’s fall as supply returns

Crude oil storage tanks viewed from above at Cushing Oil Hub, Cushing, Oklahoma, March 24, 2016. REUTERS / Nick Oxford / File Photo

KUALA LUMPUR, July 6 (Reuters) – Oil prices rose as much as almost 3% on Wednesday, before revealing some gains when investors returned to the market after a sharp slide in the previous season, with supply concerns returning to the forefront themselves as concerns about a global recession linger.

Brent oil futures rose as much as $ 3.08, or 2.9%, to $ 105.85 a barrel in early trading after plunging 9.5% on Tuesday, the biggest daily fall since March. It was last up $ 1.63, or 1.6%, to $ 104.40 a barrel at 0650 GMT.

US West Texas Intermediate (WTI) oil climbed to a session high of $ 102.14 per barrel, up $ 2.64, or 2.7%, after closing below $ 100 for the first time since the end of April. It plunged briefly into negative territory in the midst of a stronger US dollar before resuming recovery and was last up $ 1.20, or 1.2%, to $ 100.70 per barrel.

The dollar strengthened to a 20-year high against the euro and several-month highs against other major competitors, as higher gas prices and political uncertainty renewed fears of a recession, sending investors on their way to the safe haven currency.

A stronger dollar usually makes oil more expensive in other currencies, which may dampen demand.

“Today is a kind of reset. There is no doubt that there is short coverage and offer hunters are coming in,” said John Kilduff, partner at Again Capital LLC.

“The basic story of global austerity is still there … Sales were definitely exaggerated,” he added.

Meanwhile, former Russian President Dmitry Medvedev warned that a reported proposal by Japan to limit the price of Russian oil to around half the current level would lead to significantly less oil in the market and push prices above $ 300- $ 400 per barrel.

On the other hand, the Norwegian government on Tuesday intervened to end a strike in the petroleum sector that had cut oil and gas production, said a union leader and the Ministry of Labor, and ended a deadlock that could have exacerbated Europe’s energy crisis. read more

By Saturday, the strike would have cut daily gas exports by 1,117,000 barrels of oil equivalent (boe), or 56% of daily gas exports, while 341,000 barrels of oil would have been lost, say Norwegian oil and gas (NOG) employers. in the lobby.

However, concerns about a recession continue to weigh on markets. According to some early estimates, the world’s largest economy may have shrunk during the three months from April to June. It would be the second consecutive quarter of contraction, given the definition of a technical recession. read more

More G10 central banks raised interest rates in June than in any month for at least two decades, Reuters calculations showed. With inflation at heights over several decades, the pace of policy tightening is not expected to give up in the second half of 2022. read more

“Although crude oil still faces the problem of supply shortages, key factors that led to strong oil sales yesterday remain,” said Leon Li, a Shanghai-based analyst at CMC Markets. He cited policy tightening from global central banks and a likely rise in interest rates from the US Federal Reserve, which is pushing up commodity prices.

“Therefore, today’s upturn may be a short-term correction for bears, and oil prices are likely to remain under pressure in the near future.”

Renewed concerns about COVID-19 shutdowns across China could also limit oil price gains.

The world’s largest crude oil importer is fighting COVID flare-ups across the country with mass testing and new restrictions. China has reported cases of coronavirus in the cities of Shanghai, Beijing, eastern Anhui and Jiangsu provinces and the northwestern city of Xian. read more

Reporting by Arathy Somasekhar in Houston, Emily Chow in Kuala Lumpur; Edited by Sam Holmes and Kenneth Maxwell

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