(Reuters) -Oil prices got back on their feet on Thursday after falling sharply for two days in a row. Investors turned their attention back to tight supplies, even though they were still worried about the demand outlook because of the risk of a global recession.
By 04:02 GMT, Brent crude futures had gone up 67 cents, or 0.7%, to $101.36 per barrel after falling more than $2 to a session low of $98.50. WTI crude futures went up 59 cents, or 0.6%, to $99.12 a barrel after hitting a low of $96.57 during the day.
The head of commodity research at ING, Warren Patterson, said, “Concerns about a recession are getting worse, which makes it clear that there are some worries about the demand outlook.”
“However, strong fundamentals should mean that there isn’t much more downside.”
He also said that it’s hard to be too pessimistic about oil prices because Brent monthly spreads are still far in the backwardation direction, which shows that supplies are tight. In a backwardated market, prices for the next month are higher than prices for the month after that.
Also, “recent talks with Iran about its nuclear programme don’t seem to have led to much,” Patterson said.
Washington tightened sanctions on Iran on Wednesday, putting more pressure on Tehran as it tries to bring back the 2015 nuclear deal with Iran.
A consulting firm called Eurasia Group cut the chances of an agreement between the US and Iran this year from 40% to 35%, saying that Tehran is “likely ambivalent” about a deal.
Oil prices have gone down, along with those of other commodities like metals and palm oil, because central banks around the world have been raising interest rates to fight inflation over the past few months. This has increased fears of a recession and hurt demand for commodities.
Brent and WTI hit their lowest prices since April 11, when they closed on Wednesday. Even though global supplies are tight, Tuesday’s drop was very big. WTI fell by 8% while Brent fell by 9%. This was the third biggest drop for the contract since it began trading in 1988, when it fell by $10.73.
Stephen Innes, managing partner of SPI Asset Management, said that the risk of a recession is like an anvil around the market’s neck because commodity traders are becoming very risk-averse because of growing demand and still hawkish (U.S. Fed) policy worries.
Traders are keeping an eye on the Caspian Pipeline Consortium (CPC), which has been told by a Russian court to stop working for 30 days. If there is a problem, the oil supply could be cut off. As of Wednesday morning, CPC, which handles about 1% of the world’s oil supplies, was still sending out oil.
Also, investors are waiting for data from the U.S. government that will show how oil and fuel stocks are doing in the country. This data is due on Thursday.
According to market sources, industry data released on Wednesday showed that U.S. crude stocks went up by about 3.8 million barrels last week. Gasoline stocks went down by about 1.8 million barrels, and distillate stocks went down by about 635,000 barrels. [API/S] [EIA/S]
