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Picture: 123RF
Picture: 123RF

Singapore — Oil prices edged lower on Monday, reversing earlier gains, as concerns about slowing global economic growth and fuel demand outweighed worries about tightening supplies.

Brent crude futures slipped 3c to $113.09 a barrel by 7.15am, after rising as much as 1% earlier. Front-month prices tumbled 7.3% last week, their first weekly fall in five.

US West Texas Intermediate crude was at $109.42 a barrel, down 14c, or 0.1%, after rising more than $1 earlier. Front-month prices dropped 9.2% last week, the first decline in eight weeks.

“Clearly macro factors are driving oil at the moment, rather than fundamentals, which are still supportive,” said Warren Patterson, ING's head of commodities research.

CMC markets analyst Tina Teng said lower oil prices are due to “broad recession fears after the [US] Fed outsize its rate hike to 75 basis points, which was followed by similar tightening approaches by the Bank of England and the Swiss National Bank last week.”

Oil from Russia, the world's second-largest exporter, remains out of reach to most countries because of Western sanctions over Moscow's invasion of Ukraine.

The impact has been partly mitigated by the release of strategic petroleum reserves, led by the US, and a ramp-up of production from Opec and its allies, together known as Opec+, though that is thinning the world's buffer against further supply disruption.

“If Washington sticks to its current pace, the US strategic reserve will hit a 40-year low of 358-million barrels by October,” ANZ analysts said in a note.

China's crude oil imports from Russia soared 55% from a year earlier to a record level in May, displacing Saudi Arabia as the top supplier, as refiners cashed in on discounted supplies amid sanctions on Moscow.

Still, US oil and gas production is climbing.

The oil and gas rig count, an early indicator of future output, rose by seven to 740 in the week to June 17, its highest since March 2020, energy services firm Baker Hughes Co said in its report on Friday.

In Opec member Libya, meanwhile, oil production remained volatile after blockades by groups in the country's east.

The Libyan oil minister Mohamed Oun said on Monday that the country's total production is at about 700,000 barrels per day (bpd). Libya's output had fallen to 100,000 to 150,000 bpd, a spokesperson for the oil ministry said last week.

Elsewhere, oil products exports from China, once a major exporter, continued to decline, keeping global supplies tight.

The country's petrol exports in May fell 46% from a year earlier and diesel exports plunged 93% despite stalling domestic demand, as companies ran short of export quotas, Chinese customs data showed on Saturday.

Reuters

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