Oil prices fell as slowing global economic growth outweighed tight supply
Oil prices fell on Monday, reversing earlier gains as slowing global economic growth and concerns about fuel demand outweighed concerns about tighter supplies.
Brent crude futures were down 3 cents to $113.09 a barrel as of 0515 GMT, after previously climbing as much as 1%. Front-month prices fell 7.3% last week, marking the first weekly drop in the fifth week.
West Texas Intermediate (WTI) crude was trading at $109.42 a barrel, down 14 cents, or 0.1%, after previously rising more than $1. Front-month prices fell 9.2% last week, which was the first drop in eight weeks.
Macro factors are clearly making themselves felt rather than the fundamentals supporting oil. Oil prices are falling on fears of a broad recession after the Fed increased interest rates to 75 basis points, followed by similar tightening approaches by the Bank of England and the Swiss National Bank.
The product of Russia, the world's second-largest exporter, cannot reach most countries due to Western sanctions on its invasion of Ukraine.
The impact was mitigated in part by the release of US-led strategic oil reserves and increased production by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
If Washington sticks to its current SPR release rate, US strategic reserves will hit a 40-year low of 358 million barrels by October.
On the other hand, China's crude oil imports from Russia increased by 55% compared to the previous year, reaching a record level in May. The price advantage of the Russian product, which is banned by most western countries, has taken Saudi Arabia away from being the largest supplier to China.
By the way, US oil and gas production is climbing. Energy services firm Baker Hughes Co said in a report Friday that the number of oil and gas rigs, an early indicator of future production, rose seven to 740 in the week through June 17, becoming the highest level since March 2020.
Oil production in Libya, a member of OPEC, is fluctuating after the blockades of groups in the east of the country.
Libyan Oil Minister Mohamed Oun said the country's total production is about 700,000 barrels per day (bpd) and a spokesperson for the oil ministry said last week that Libya's output has fallen to between 100,000 and 150,000 barrels per day.
Exports of petroleum products from China, once a major exporter, continue to decline and contributes to tightening global supplies. According to Chinese customs data released on Saturday, the country's gasoline exports fell 46% year-on-year in May, and diesel exports fell 93% despite the stagnation of domestic demand.
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