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Picture: 123RF/EVGENII BASHTA
Picture: 123RF/EVGENII BASHTA

Singapore/New York — Oil prices rebounded on Wednesday from sharp losses in the previous session as concerns about tighter supplies from Russia and Libya dominated, while industry data showed a drop in US crude inventories last week.

Brent crude futures rose 98c, or 0.9%, to $108.23 a barrel by 4.00am GMT, while the front-month West Texas Intermediate (WTI) crude futures contract, which expires on Wednesday, rose 94c, or 0.9%, to $103.50 a barrel. The second-month contract gained $1.07 to $103.12 a barrel.

Both benchmarks fell 5.2% in volatile trading on Tuesday after the International Monetary Fund (IMF) slashed its forecast for global growth by nearly a full percentage point, citing the economic affects of Russia’s war in Ukraine, and warning that inflation was now a “clear and present danger” for many countries.

“The sell-off yesterday on the back of the IMF revisions was probably overdone,” said Warren Patterson, ING’s head of commodities strategy based in Singapore.

“I believe that risks are still skewed to the upside, with the potential for further disruptions from Libya, but more importantly, the potential for an EU ban on Russian oil.”

Russia’s ‘special operation’ boosts oil price

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

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

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

Russia produced about 300,000bbl/day below its target in March at 10.018-million barrels a day based on secondary sources, the report showed.

Other outages added to the concerns about supply. Libya’s National Oil Corporation (NOC) declared force majeure at the Brega oil port on Tuesday, saying it was unable to fulfil its commitments towards the oil market.

In the US, crude stocks fell 4.5-million barrels last week, according to market sources citing American Petroleum Institute (API) figures on Tuesday, against expectations of an increase in inventories.

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.

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