Oil prices recover from losses and increase due to supply concerns

4 Jul 2022 , 01:51 PM

On Monday, oil prices reversed their losses and began to rise as worries about a shortage due to lower OPEC production, turmoil in Libya, and sanctions against Russia outweighed worries about a possible global recession.

After dropping more than $1 in early trade, September Brent crude futures were up 55 cents, or 0.5 percent, at $112.18 a barrel.

Following a $1 earlier decline, U.S. West Texas Intermediate (WTI) oil futures for August delivery increased by 44 cents, or 0.4%, to $108.87 per barrel.

According to a Reuters survey, the Organization of the Petroleum Exporting Countries (OPEC)’s members produced 100,000 fewer barrels per day (bpd) in June than they had promised to increase production by approximately 275,000 bpd.

Analysts believe that the likelihood of OPEC meeting its recently increased production quotas will become even less likely because declines in Nigeria and Libya offset increases by Saudi Arabia and other significant producers, and Libya faces further supply disruption because of escalating political unrest.

The National Oil Corp reported last week that Libya’s exports have decreased to between 365,000 and 409,000 bpd, or around 865,000 bpd below normal levels.

A planned strike by Norwegian oil and gas employees this week could reduce the nation’s output of oil and condensate by 130,000 bpd, significantly reducing supply.

Thoughts of a global recession are thought to be limiting oil’s price increases.

Despite a little improvement in inflation expectations, U.S. consumer sentiment hit a record low in June as worries about interest rate hikes increased and the Federal Reserve declared its commitment to containing inflation to be “unconditional.”

As refiners prepare for another significant increase that could approach the record established in May, traders will be keeping an eye out for official prices for August from leading oil producer Saudi Arabia.