Oil wobbles as global economic worries offset tight supply

© Reuters. An aerial view shows fuel tanks of the operator of the Transneft pipeline at the crude oil terminal Kozmino on the coast of Nakhodka Bay near the Russian port city of Nakhodka on June 13, 2022. This photo was taken with a drone.REUTERS/Tatiana Mayer

Florence Tan

SINGAPORE (Reuters) – Oil prices edged lower on Monday, reversing earlier gains, as worries about slowing global economic growth and fuel demand offset concerns about tighter supplies.

Futures were down 8 cents, or 0.1%, at $113.04 a barrel by 0242 GMT, after rising 1% earlier. Front-month prices fell 7.3% last week, the first drop in five weeks.

U.S. West Texas Intermediate crude was at $109.49 a barrel, down 7 cents after gaining more than $1. Front-month prices fell 9.2% last week, the first drop in eight weeks.

Warren Patterson, head of commodities research at ING, said: “It’s clear that macro factors, not fundamentals, are driving oil prices right now, but fundamentals remain supportive.”

Oil from Russia, the world’s second-biggest exporter, remains locked out of most countries due to Western sanctions over the war in Ukraine.

The release of the U.S.-led Strategic Petroleum Reserve and increased production by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, have partially mitigated the impact, although this has weakened the world’s buffer against further supply disruptions.

“If Washington sticks to its current pace, U.S. strategic reserves will hit a 40-year low of 358 million barrels by October,” ANZ analysts said in a note.

Still, U.S. oil and gas production is climbing.

The number of oil and gas rigs, an early indicator of future output, rose by seven to 740 in the week ended June 17, the most since March 2020, energy services firm Baker Hughes said in its report on Friday. the highest level.

In Libya, oil production remains unstable after a group blockade in the east of the country.

Libyan Oil Minister Mohamed Oun told Reuters on Monday that the country’s total production was around 700,000 barrels per day (bpd). An oil ministry spokesman said last week that Libya’s output had fallen to 100,000 to 150,000 barrels a day.

Exports of Chinese petroleum products, once a major exporter, have continued to decline, straining global supplies.

Despite stagnating domestic demand, the country’s gasoline exports fell 45.5% year-on-year in May and diesel exports fell 92.7% due to insufficient export quotas by companies, data from China’s customs showed on Saturday.

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