Oil prices rise as supply is tight and the market cautious
Oil prices rose on Tuesday, and regained most of last week's losses as investors focused on the limited supply of crude oil and fuel products rather than fears that the recession would dampen demand going forward.
Brent crude futures added 0.9% gains on Monday and were up 81 cents, or 0.7%, to $114.94 a barrel at 0703 GMT. The benchmark fell 7.3% last week in its first weekly drop in five weeks.
West Texas Intermediate (WTI) crude futures for July, which expire later on Tuesday, rose $1.63, or 1.5%, to $111.19 from Friday's close. No action was taken on Monday, a public holiday in the United States. WTI fell 9.2% last week.
The more active WTI contract for August rose $1.84 to $109.83 a barrel.
Supply concerns are likely to continue in the coming months as OPEC+ countries may not have enough spare capacity.
The summer travel season and China's relaxation of COVID-19 restrictions will boost demand. While recession fears are becoming a growing negative for oil prices, it's estimated that we are about at least six months prior to a real recession.
Sanctions on oil shipments after Russia, the world's second-largest oil exporter, invaded Ukraine, bolster supply concerns and raise questions about how Russia's output could fall due to sanctions on equipment needed for production, analysts say.
Supply concerns are unlikely to subside unless a solution to the Russia-Ukraine war is found or we see a sharp increase in supply from the US or OPEC.
Demand concerns are accelerating as central banks and large institutions lower their growth forecasts. With growth concerns high, markets' reaction to economic figures may intensify in the near term and signs of the slowdown may lower prices.
Analysts think that the push and pull between supply concerns and uncertainty over global growth could be effective in the market for a while.
US inventory data is a day late this week. Weekly US oil inventory data will be delayed by one day this week due to Monday's Juneteenth holiday. American Petroleum Institute (API) industry data for the week ending June 17 will be released on Wednesday, and U.S. Energy Information Administration (EIA) data will be on Thursday.
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