Image: Reuters Berita 24 English - Despite continued concerns about the demand forecast and the possibility of a worldwide recession, oil pr...
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| Image: Reuters |
Berita 24 English - Despite continued concerns about the demand forecast and the possibility of a worldwide recession, oil prices recovered their footing on Thursday after suffering sharp declines in the previous two sessions.
After falling more than $2 to a session low of $98.50 earlier, Brent oil futures increased by 67 cents, or 0.7 percent, to $101.36 a barrel at 0402 GMT. From an intraday low of $96.57, WTI oil futures increased 59 cents, or 0.6 percent, to $99.12 a barrel.
According to Warren Patterson, ING's head of commodity research, "recession fears continue to build, and that obviously does raise some concerns for the demand picture."
However, strong fundamentals should indicate that the amount of further decline is rather little.
It is difficult, he continued, to be unduly gloomy on oil prices given that the Brent monthly spreads continue to be in large backwardation, a sign of limited supplies. In a backwardated market, immediate-month prices are greater than those in upcoming months.
Additionally, according to Patterson, "latest Iranian nuclear discussions don't appear to have produced much."
On Wednesday, Washington strengthened sanctions against Iran in an effort to put pressure on Tehran to salvage the 2015 Iran nuclear deal.
A consultant called Eurasia Group decreased the likelihood of a deal between the United States and Iran this year from 40% to 35%, citing Tehran's "likely ambivalent" attitude toward one.
As central banks around the world increased interest rates over the past few months to combat inflation, fueling worries of a recession and reducing demand for commodities, oil prices have fallen along with those of other commodities like metals and palm oil.
On Wednesday, Brent and WTI reached their lowest closing prices since April 11. The decreases come after a sharp drop on Tuesday despite low supply elsewhere. WTI fell 8% and Brent fell 9%; the contract's $10.73 decline was the third-largest since it began trading in 1988.
According to Stephen Innes, managing partner of SPI Asset Management, "commodity traders are getting highly risk-averse due to growing demand and still hawkish (U.S.) Fed policy concerns, so the recessionary headline risk is like an anvil over the market's neck."
Traders are keeping an eye out for any potential disruptions to the oil supply at the Caspian Pipeline Consortium (CPC), which has been ordered by a Russian court to halt operations for 30 days. As of Wednesday morning, exports at CPC, which manages 1% of the world's oil supplies, were still going strong.
Investors are also anticipating U.S. government data that is scheduled to be released on Thursday and will provide information on the status of domestic oil and fuel stockpiles.
According to market sources, industry data released on Wednesday showed that U.S. oil stockpiles increased by roughly 3.8 million barrels last week. While distillate stocks decreased by roughly 635,000 barrels, gasoline inventories decreased by 1.8 million barrels.
