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A drilling rig operates in the Permian Basin oil and natural gas production area in Lea County, New Mexico, US. File photo: REUTERS/NICK OXFORD
A drilling rig operates in the Permian Basin oil and natural gas production area in Lea County, New Mexico, US. File photo: REUTERS/NICK OXFORD

London — Oil prices rebounded on Wednesday as a drop in US oil inventories and concerns over tighter supplies from Russia and Libya drove a recovery from the previous session’s sharp losses.

Brent crude futures rose 66c, or 0.6%, to $107.91 a barrel by 9.48am GMT.

The front-month WTI crude futures contract, which expires on Wednesday, rose 78c, or 0.8%, to $103.34 while the second-month contract gained 69c to $102.74.

The two main benchmarks had fallen 5.2% in volatile trading on Tuesday after the International Monetary Fund (IMF) cut its forecast global growth forecast nearly a full percentage point, citing the economic effects of Russia’s war in Ukraine and warning that inflation had become a “clear and present danger” for many countries.

“Weakening growth and mounting inflationary pressure can only mean one thing: the spectre of stagflation is hanging over the global economy,” said PVM analyst Stephen Brennock.

Global oil prices have been pulled higher by a tighter supply outlook after sanctions against Russia — the world's second-largest oil exporter and a key European supplier — over its invasion of Ukraine, which Moscow calls a “special operation”.

However, a softer global economic outlook and continuing Covid-19 lockdowns in China have hurt demand in the world's top crude importer and are weighing on prices.

On the supply side, oil cartel Opec and its allies, known collectively as Opec+, produced 1.45-million barrels per day (bbl/day) below its production target in March as Russian output began to decline after sanctions imposed by the West, a report from the producer alliance showed.

Various outages added to concerns about supply. Opec member Libya has been forced to shut down a number of oil facilities including the 300,000bpd Sharara oilfield because of a wave of protests.

Libya's National Oil Corporation declared force majeure at the Brega oil port on Tuesday, saying it was unable to fulfil its commitments to the oil market.

The Caspian Pipeline Consortium’s (CPC) Black Sea terminal could return to full capacity as early as Wednesday, Kazakh energy minister Bolat Akchulakov said. The CPC pipeline and terminal, which ship about 80% of Kazakh crude exports, have been working at half usual capacity after a storm damaged two of its three mooring points in March.

In the US, crude stocks fell by 4.5-million barrels last week, according to market sources citing American Petroleum Institute figures on Tuesday.

The Energy Information Administration (EIA), the statistical arm of the US department of energy, will release its weekly data at 2.30pm GMT on Wednesday.

Reuters

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