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Oil prices rebound from pre-Ukraine war lows

Oil

05 Aug 2022 06:05

Photo: Shutterstock.com

Photo: Shutterstock.com

05 Aug 2022 06:05

(Montel) Brent crude oil prices edged up on Friday morning after hitting their lowest levels since Russia invaded Ukraine in February.

The front-month contract for Brent crude North Sea oil traded last up USD 0.46 at USD 94.55/bbl on Ice Futures, while the US WTI equivalent was USD 0.62 higher on the day at USD 89.16/bbl.

On Thursday, the international Brent crude benchmark slid to its lowest level since 21 February to USD 93.20/bbl.

Prices rebounded on Friday amid lingering concerns over tight supply, despite global economic headwinds.

“Both Brent and WTI Crude oil opened in the green in early Asian Market trade [on Friday] after dropping significantly this week as Taiwan crisis, US economic data and Bank of England raising rates all painted a dull demand picture for crude oil,” said Philip Novain a note.

“This week’s sell-off was sparked by EIA data that showed demand for gasoline had fallen to 2020 levels due to high prices. However, the ability of Russia to find alternative buyers of its crude has also weighed on sentiment,” said analysts at ANZ bank.

Last month, the International Monetary Fund warned that the global economy could soon be teetering on the brink of recession, as major economies battle soaring inflation driven by rising energy and food costs.

“Crude oil fell further [on Thursday] on demand concerns on a cloudy economic outlook, with inflation keeping elevated,” said Tina Teng, analyst at CMC Markets.

Others agreed. “Oil prices continue to stay in backwardation – where forward month contracts are priced lower than current month – indicating investors are discounting a projected demand drop forecast as economies globally are heading towards recession, tackling the biggest challenge of decade, Inflation.” said analysts at Philip Nova.

Small supply hike
On Wednesday, major oil producers known as Opec+, led by Saudi Arabia and Russia, ageed to add 0.1m bbl/day to the market from September.

“Opec’s meagre increase in production quotas announced this week was also a sign it is worried that there is a lack of spare capacity in the market that could be used to buffer any further supply shortages,” said ANZ bank.

Some Opec members have been struggling this year to meet their existing monthly supply targets due to disruptions or capacity constraints, while Russia has been boosting supply to China and India to offset the hit caused by Western sanctions over its war in Ukraine.

Following Russia’s invasion of Ukraine late in February, oil prices surged above USD 100/bbl and briefly surpassed USD 139/bbl for the first time since 2008.

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