Oil prices drop after three days of rally
Oil prices fell on Wednesday after rising in the previous three sessions as the market faltered amid concerns over the global economy and tight global oil supplies.
Brent crude futures for August fell 84 cents, or 0.7%, to $117.14 a barrel as of 0444 GMT. The August contract expires on Thursday and the more active September contract is down 63 cents, or 0.6%, to 113.17.
West Texas Intermediate (WTI) crude futures fell 54 cents, or 0.5%, to $111.22 a barrel.
Both contracts rose more than 2% on Tuesday as concerns over supply shortages due to Western sanctions against Russia outweighed fears that demand could slow in a future recession.
The market is stuck in a push-pull between the current worsening macro backdrop and the threat of an impending recession.
Saudi Arabia and the United Arab Emirates are seen as the only two members of the Organization of the Petroleum Exporting Countries (OPEC) with spare capacity to make up for the lost Russian supply. But statements this week by UAE Energy Minister Suhail al-Mazrouei and French President Emmanuel Macron showed that there is little room for these producers to increase production even further.
Investors have made position adjustments, but expectations remain that Saudi Arabia and the United Arab Emirates will not be able to significantly increase production to meet revived demand due to the recovery in jet fuels.
Oil prices will likely stay above $110 a barrel as the US enters summer, amid concerns about potential supply disruptions from hurricanes.
Analysts also warned that political unrest in Ecuador and Libya could further tighten supply.
Changes in Russian oil trade could come after the G7 reached an agreement Tuesday to explore ways to limit the price of Russian oil and provide more supply to the market while reducing Moscow's revenues.
But traders and analysts are skeptical that such a deal would require the cooperation of China and India and how it would work.
There is a general stance on a price cap, but it will have a limited impact if not adopted by all countries globally.
Data from the American Petroleum Institute showed that for the week ended June 24, gasoline and distillate stocks rose while crude oil stocks fell.
The weekly EIA oil condition report last week was delayed due to a hardware issue. Official data for both weeks will be published together today.
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