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Oil settles up nearly $4 as tight supply outweighs recession fears

Commodities Jul 07, 2022 03:41PM ET
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© Reuters. FILE PHOTO: Oil pump jacks are seen at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquen, Argentina, January 21, 2019. REUTERS/Agustin Marcarian

By Laura Sanicola

(Reuters) - Oil prices settled sharply higher on Thursday, rebounding from steep losses the previous two sessions, as investors returned their focus to tight supply despite nagging fears of a potential global recession.

Brent crude futures were up $3.96, or 3.9%, at $104.65 a barrel. U.S. WTI crude futures climbed $4.20, or 4.3%, to $102.73 a barrel.

Trade was volatile. At session lows, prices were down about $2.

Wall Street's main indexes opened higher, making up for some losses last week tied to recession fears as central banks aggressively hike interest rates to fight inflation.

"With Russian oil supplies set to drop as the year progresses and it runs out of Western parts to maintain fields, and with the rest of OPEC hopelessly uninvested in maintaining production capacity, I fear the days of $100 oil will be with us for some time yet," said Jeffrey Halley, a senior market analyst at OANDA.

On the supply side, traders are bracing for oil supply disruptions at the Caspian Pipeline Consortium (CPC), which has been told by a Russian court to suspend activity for 30 days.

Exports via the CPC, which handles about 1% of global oil supplies, were still flowing as of Wednesday morning.

Further squeezing global supplies, Washington tightened sanctions on OPEC member Iran on Wednesday, pressuring Tehran as it seeks to revive a 2015 Iran nuclear deal and unleash its exports.

Oil prices have dropped in the past few weeks as investors worried that a sharp economic slowdown could slam demand for commodities.

"Margin call selling that appeared to spur much of this week’s price plunge has likely been completed," said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

U.S. crude oil stockpiles rose by 8.2 million barrels last week, driven by an increase in inventories and as refiners cut output, the Energy Information Administration said.

However, product supplied, the best proxy for U.S. consumer demand, was up in the latest week to 20.5 million bpd.

"Almost every indicator in that report seems to suggest that just demand is gaining momentum," said Phil Flynn, an analyst at Price Futures group.

On Wednesday, Brent and WTI settled at their lowest since April 11. On Tuesday, WTI slid 8% while Brent tumbled 9% - a $10.73 drop that was the third biggest for the contract since it started trading in 1988.

"Recession fears continue to grow and that obviously does raise some concerns for the demand outlook," said Warren Patterson, ING's head of commodity research.

"However, supportive fundamentals should mean that further downside is relatively limited."

Oil settles up nearly $4 as tight supply outweighs recession fears
 

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Comments (5)
Stephen Fa
Stephen Fa Jul 07, 2022 1:21PM ET
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3 years of global and US under investment in exploration and production will drive oil and gas higher long term.
Jeremy Johnson
Jeremy Johnson Jul 07, 2022 10:50AM ET
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Same story, different day: the other day crude was down on recession fears, then it was flat on recession fears with tight supply, today it's up on tight supply.  Let me guess, when oil is down the journalists will write, "down on recession fears", then when it's up journalists will write, "up on tightening supply", and finally, when flat, "flat as investors weigh tight supply with looming recession".  A monkey could write this stuff!
Jose Marquez
Jose Marquez Jul 07, 2022 10:31AM ET
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Makes you want to laugh tight offer?? until the end of the year we will see more production cuts there is more than enough oil .. the speculators live flasifying reports
Илья Донских
Илья Донских Jul 07, 2022 10:31AM ET
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Buddy, underinvesting in fossil fuels in favor of green energy makes the market a very voluntaristic place. If you look at the state of U.S. oil stocks instead of the EIA reports, you might find a very interesting insider.
Robert Murphy
Robert Murphy Jul 07, 2022 10:28AM ET
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Holy cow. Make up your mind
Robert Murphy
Robert Murphy Jul 07, 2022 10:27AM ET
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Holy ****** Make up your mind.
 
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