Oil prices rebounded on Wednesday from sharp losses in the previous session as concerns about tighter supplies from Russia and Libya dominated, while industry data showed a drop in US crude inventories last week.
Brent crude futures rose 98 cents, or 0.9 percent, to $108.23 a barrel while the front-month WTI crude futures contract, which expires on Wednesday, rose 94 cents, or 0.9 percent, to $103.50 a barrel. The second-month contract gained $1.07 to $103.12 a barrel.
Both benchmarks fell 5.2 percent in volatile trading on Tuesday after the International Monetary Fund (IMF) on Tuesday slashed its forecast for global growth by nearly a full percentage point, citing the economic impacts of Russia’s war in Ukraine, and warning that inflation was now a “clear and present danger” for many countries.
“The sell-off yesterday on the back of the IMF revisions was probably overdone,” said Warren Patterson, ING’s head of commodities strategy based in Singapore.
“I believe that risks are still skewed to the upside, with the potential for further disruptions from Libya, but more importantly, the potential for an EU ban on Russian oil.”
Global oil prices have been volatile, pulled higher by a tighter supply outlook following sanctions on Russia, the world’s second-largest oil exporter and a key European supplier, after its invasion of Ukraine, which Moscow calls a “special operation”.
However, a softer global economic outlook and ongoing COVID-19 lockdowns in China that have hurt demand in the world’s top crude importer are weighing on prices.
On the supply side, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, produced 1.45 million barrels per day (bpd) below its production targets in March, as Russian output began to decline following sanctions imposed by the West, a report from the producer alliance reviewed by Reuters showed.
Russia produced about 300,000 bpd below its target in March at 10.018 million bpd, based on secondary sources, the report showed.
Other outages added to the concerns about supply. Libya’s National Oil Corporation declared force majeure at the Brega oil port on Tuesday, saying it was unable to fulfill its commitments towards the oil market.
The International Energy Agency (IEA) said in a monthly report last week it expected Russian oil output losses to grow to 1.5 million bpd in April and to double to 3 million bpd from May because of sanctions and buyer aversion.
OPEC+ compliance with the production cuts rose to 157 percent in March, from 132 percent in February, the data showed, the highest since the group introduced record production cuts of about 10 million bpd in May 2020 to counter the impact of the pandemic on demand.
OPEC+, which groups OPEC and allies led by Russia, agreed last month to another modest monthly oil output boost of 432,000 bpd for May, resisting pressure by major consumers to pump more.
As the group unwinds production cuts, several producers, namely West African countries struggling with underinvestment and an exodus of international energy companies, are failing to keep up.
At its meeting last month, OPEC+ also ditched the Paris-based IEA as one of its secondary sources, replacing it with consultancies Wood Mackenzie and Rystad Energy.
In the United States, crude stocks fell 4.5 million barrels last week, according to market sources citing American Petroleum Institute figures on Tuesday, against expectations of an increase in inventories.
The Energy Information Administration (EIA), the statistical arm of the US Department of Energy, will release its weekly data at 10:30 a.m. EDT (1430 GMT) on Wednesday. — Reuters
