Oil prices rebound after Tuesday's slump amid supply concerns
Oil pulled back some gains after climbing as much as 3% on Wednesday as investors returned to the market after a heavy drop in the previous session. Supply concerns remain at the fore, even as concerns about a global recession persist.
Brent crude futures rose as high as $3.08, or 2.9%, to $105.85 a barrel in early trade, after falling 9.5% on Tuesday, the biggest daily drop since March. It was last traded at $103.69 a barrel at 0243 GMT, up 92 cents, or 0.9%.
West Texas Intermediate (WTI) crude climbed to a session high of $102.14 a barrel, up $2.64, or 2.7%, after closing below $100 for the first time since late April. It was last traded at $99.96 a barrel, up 46 cents, or 0.5%.
The fluctuations were speculative, a kind of reset. There is no doubt that investors seeking short-term hedges or margins are active. The basic story of the global contraction still continues.
OPEC Secretary-General Mohammad Barkindo said on Tuesday that the industry has been "under siege" for years due to insufficient investment and that the famine could be alleviated if extra supply from Iran and Venezuela is allowed.
Russia's former president, Dmitry Medvedev, also warned that Japan's efforts to reduce the price of Russian oil to about half of its current level would result in significantly less oil on the market and push prices above $300-$400 per barrel.
Meanwhile, a union leader and labor ministry said on Tuesday the Norwegian government had intervened to end the strike that could cut oil and gas production in the oil sector and worsen Europe's energy crisis.
Recession concerns continue to put pressure on the markets. By some calculations, the G10 central bank has raised interest rates more in June than in any month for at least two decades. With inflation at its highest levels in decades, the pace of policy tightening is not expected to slow down in the second half of 2022.
The tightening of global central banks' policies and the possible increase in interest rates by the US Federal Reserve are putting pressure on commodity prices. Although crude oil still faces a shortage of supply, key factors that led to sharp sales in oil yesterday remain. So, today's recovery could be a short-term correction for the bears, and oil prices are likely to remain under pressure in the near future.
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