Oil edges higher as markets weigh tight supplies and recession fears
Oil prices gained moderately in Asian trade on Friday, bucking the week’s volatile trend and reversing earlier losses, even as global markets assessed tight supply concerns and recession fears in major economies.
Brent crude futures rose 48 cents, or 0.5%, to $105.13 a barrel by 0630 GMT, after a near 4% rise on Thursday. The benchmark US West Texas Intermediate crude inched up 3 cents to $102.76 a barrel, having settled 4.2% higher a day earlier.
On Tuesday and Wednesday, oil prices spiralled on fears that a potential recession will slash demand, with Brent crude sinking under $100 per barrel. Europe’s benchmark crude contract, Brent North Sea, dropped 3.3 percent to $99.39 per barrel, while WTI also fell 3.3 percent to stand at $96.12 on Wednesday.
The sharp sell-off saw WTI ultimately slide by 8% and Brent tumbling 9%. Brent's $10.73 drop was the third biggest for the contract since it started trading in 1988.
Despite the modest gains on Friday, both contracts are still set for their second straight weekly loss.
According to analysts, the sell-off in the commodity markets got a reprieve over the past couple of days as traders turned their focus to supply issues.
"With more rate hikes to come and the US likely in a technical recession, top-side market ambitions could be quite limited. The only reason why oil is not lower is due to self (imposed) and official sanctions on Russian oil," Stephen Innes, managing director at SPI Asset Management, told Reuters.
According to CMC Markets analyst Tina Teng, the economic uncertainties “remain with the inverted benchmark bond yields pointing to an unavoidable recession, which may continue to weigh on commodity prices."
Data from US Energy Information Administration (EIA) showed on Thursday that product supplied, the best proxy for US consumer demand, rose to 20.5 million barrels per day in the most recent week. Overall petrol and distillate demand over the past four weeks, however, was down a little more than 5% from the year-ago period, according to the data.
The inventory also showed that US crude stockpiles rose by 8.2 million barrels in the week to July 1, driven by an increase in inventories and as refiners cut output.
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