Oil prices rebounded on Thursday after a dramatic decline the previous day, backed by tight oil supplies and peak summer consumption, following a significant rate rise in the United States that spurred worries of weaker economic growth and decreased fuel demand.

Brent oil prices were up 86 cents, or 0.7 percent, to $119.37 a barrel at 0644 GMT, while West Texas Intermediate (WTI) crude futures were up 96 cents, or 0.8 percent, to $116.27 a barrel.

Prices fell more than 2% overnight as the Federal Reserve hiked interest rates by three-quarters of a percentage point, the largest increase since 1994.

The USD index

As Western sanctions hampered access to Russian oil, investors remained focused on tight supply and solid demand.

“It was overall a volatile session across almost all markets yesterday,” said Howie Lee, an economist at Singapore’s OCBC bank.

“Tight fundamentals suggest any dips in oil prices are likely to be short-lived, or shallow, or possibly both.”

Oil output in Libya has dropped as a result of the country’s political deadlock, which has resulted in the suspension of production and export facilities. Production has dropped to 100,000-150,000 barrels per day, according to an oil ministry spokeswoman on Tuesday, a fraction of the 1.2 million bpd witnessed last year. more info

Also supporting the price forecast was confidence that China’s oil demand would rise once COVID-19 limitations were eased.

“A rebound in China demand sentiment, and expected seasonal ramp-up in OECD oil demand into August leaves price risk to the upside through 3Q 2022,” said Baden Moore, National Australia Bank’s head of commodities research.

The United States’ oil output increased by 100,000 barrels per day last week to 12 million bpd, the highest level since April 2020, according to statistics from the Energy Information Administration.

The EIA reported that crude stocks and distillate stockpiles in the United States increased while gasoline inventories decreased in the week ending June 10.

Source: Reuters

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