An aerial view of the Phillips 66 oil refinery is seen in Linden, New Jersey, U.S. March 8, 2022.
Tayfun Coskun | Anadolu Agency | Getty Images
Oil prices rose nearly 3% on Wednesday before paring some gains as investors retreated into the market after a sharp rout in the previous session, with supply concerns returning to the fore even as the Concerns about a global recession persist.
Brent crude futures rose $3.08, or 2.9%, to $105.85 a barrel in early trading after plunging 9.5% on Tuesday, the biggest daily decline since march. It was up 92 cents, or 0.9%, at $103.69 a barrel at 0243 GMT.
U.S. West Texas Intermediate crude hit a high of $102.14 a barrel, up $2.64, or 2.7%, after closing below $100 for the first time since late April. It was up 46 cents, or 0.5%, at $99.96 a barrel.
“Today is kind of a reset. There is no doubt that there is short cover and bargain hunters are coming,” said John Kilduff, partner at Again Capital LLC.
“The fundamental story regarding the global tightness is still there… The sale was definitely overdone,” he added.
OPEC Secretary General Mohammad Barkindo said on Tuesday the industry was “under siege” due to years of underinvestment, adding that shortages could be eased if additional supplies from Iran and the Venezuela were allowed.
Former Russian President Dmitry Medvedev also warned that a reported proposal from Japan to cap the price of Russian oil at around half of its current level would cause oil to drop significantly in the market and push prices above 300. at $400 a barrel.
Meanwhile, the Norwegian government intervened on Tuesday to end an oil sector strike that had reduced oil and gas production, a union leader and the Labor Ministry said, ending a stalemate that would have could aggravate the energy crisis in Europe.
The strike on Saturday would have reduced 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, according to Norwegian oil and gas employers. gas (NOG). said the lobby.
However, fears of a recession continued to weigh on the markets. According to some early estimates, the world’s largest economy may have shrunk in the three months from April to June. It would be the second consecutive quarter of contraction, considered the definition of a technical recession.
More G10 central banks raised interest rates in June than in any month for at least two decades, according to Reuters calculations. With inflation at its highest in decades, the pace of policy tightening is unlikely to slow in the second half of 2022.
“Although crude oil still faces the problem of a supply shortage, the key factors that led to yesterday’s strong oil selloff remain,” said Leon Li, Shanghai-based analyst at CMC Markets. He cited policy tightening from global central banks and a likely interest rate hike by the US Federal Reserve as putting pressure on commodity prices.
“Thus, today’s bounce could be a near-term correction for the bears and oil prices are likely to remain under pressure for the foreseeable future.”