Oil prices rose on Thursday, reversing earlier losses, as supply problems and geopolitical tensions in Europe took precedence over economic fears that are eating away at financial markets as inflation soars.
Brent crude rose 46 cents, or 0.4%, to $107.97 a barrel as of 11:44 a.m. EDT (4:44 p.m. GMT). WTI Crude rose $1.14, or 1.1%, to $106.85.
“Trading has been thin and no one knows what will move the needle,” said John Kilduff, partner at Agan Capital LLC in Galena, Illinois.
An impending European Union ban on oil from Russia, a key supplier of crude and fuels to the bloc, is expected to further tighten global supplies.
The EU is still negotiating the details of the Russian embargo, which needs unanimous support. However, a vote has been delayed as Hungary opposes the ban as it would disrupt its economy too much.
More generally, oil prices and financial markets have been under pressure this week amid concerns over rising interest rates, the strongest US dollar in two decades, worries about inflation and a possible recession.
Prolonged COVID-19 lockdowns in the world’s top crude importer, China, have also impacted the market.
“Current and expected sanctions on Russian oil have received a major backlash in the form of reduced demand and increased supply (strategic oil reserve),” said Jim Ritterbusch, president of Ritterbusch and Associates. in Galena, Illinois.
Headline US CPI for the 12 months to April jumped 8.3%, fueling concerns about further interest rate hikes and their impact on economic growth.
“Soaring pump prices and slowing economic growth are expected to significantly dampen demand recovery through the rest of the year and into 2023,” the International Energy Agency (IEA) said on Thursday. ) in its monthly report.
“Extended shutdowns across China … are driving a significant slowdown in the world’s second-largest consumer of oil,” the agency added.
The Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for global oil demand growth in 2022 for a second straight month, citing the impact of Russia’s invasion of Ukraine, rising inflation and the resurgence of the Omicron coronavirus variant in China.
Oil prices jumped 5% on Wednesday after Russia sanctioned 31 companies based in countries that imposed sanctions on Moscow following the invasion of Ukraine.
This created unease in the market even as Russian natural gas flows to Europe via Ukraine fell by a quarter. It was the first time that exports through Ukraine had been halted since the invasion.