Title: Oil prices reverse losses, gain on tight supply concerns

Jul 04, 2022 03:20AM ET

By: AnalysisWatch

Oil prices reversed losses and rebounded on Monday as concerns about tight supply from lower OPEC production, unrest in Libya and sanctions against Russia outweighed fears of a global recession.

Brent crude futures for September were up 55 cents, or 0.5 percent, at $112.18 a barrel at 0650 GMT, after falling more than $1 in early trade.

U.S. West Texas Intermediate (WTI) crude futures for August delivery rose 44 cents, or 0.4%, to $108.87 a barrel, after also falling $1 earlier.

Output from the 10 members of the Organisation of Petroleum Exporting Countries (OPEC) fell 100,000 barrels per day (bpd) to 28.52 million bpd in June, short of the 275,000 bpd increase they had pledged, a Reuters poll showed.

Declines in Nigeria and Libya offset increases by Saudi Arabia and other major producers, and Libya faces the threat of further supply disruptions due to escalating political unrest, making the likelihood of OPEC meeting its recently increased production quotas even less likely, ANZ Research analysts said in a note.

Libya's exports have fallen to between 365,000 bpd and 409,000 bpd, down about 865,000 bpd from normal levels, the National Oil Corp said last week.

A planned strike by Norwegian oil and gas workers this week could cut the country's oil and condensate output by 130,000 bpd, further hurting supplies.

Rising interest rates and a slump in consumer confidence have clouded the outlook for fuel demand, while data show that US oil refinery capacity has improved.

In addition, a strong USD is also weakening broad commodity markets, including crude oil prices.

US consumer sentiment fell to a record low in June, although the inflation outlook improved marginally as the Federal Reserve said its commitment to curbing inflation was "unconditional", heightening concerns about rate hikes.

Traders will be watching official August prices from Saudi Arabia, the biggest oil exporter, for signs of how tight the market is, with refiners expecting another sharp rise near the record reached in May.

Nine refining sources polled by Reuters expected the official selling price of Saudi Arabia's flagship Arab Light Crude to rise about $2.40 a barrel from the previous month.