Oil prices rose today, bouncing off their lowest levels since February in the previous session, as supply shortage concerns were enough to cancel out fears of slackening fuel demand.
Brent crude rose 55 cents, or 0.6%, to $94.67 a barrel early this morning while US West Texas Intermediate crude was up 65 cents, or 0.8%, at $89.19 a barrel.
Oil prices have come under pressure this week as the market fretted over the impact of inflation on economic growth and demand, but signs of tight supply kept a floor under prices.
“OPEC’s meagre supply hike highlights the limited capacity the market has to handle further shortages,” ANZ Research analysts said.
For September, OPEC+ is set to raise its oil output goal by 100,000 barrels a day. The hike is one of the smallest since OPEC quotas were introduced in 1982, OPEC data shows.
The global crude oil markets remained firmly in backwardation, where prompt prices are higher than those in future months, indicating tight supplies.
Supply concerns are expected to ratchet up closer to winter with the European Union sanctions banning seaborne imports of Russian crude and oil products set to take effect on December 5.
“With the EU halting seaborne Russian imports, there is a key question of whether Middle Eastern producers will reroute their barrels to Europe to backfill the void,” RBC analyst Michael Tran said.
“How this Russian oil sanctions policy shakes out will be one of the most consequential matters to watch for the remainder of the year,” Tran added.
For now, signs of an economic slowdown capped price recovery. Recession worries have intensified following the Bank of England’s warning of a drawn-out downturn after it raised interest rates by the most since 1995.
“If commodities are not pricing in an imminent economic recession, they might be preparing for a ‘stagflation’ era when the unemployment rate starts picking up and inflation stays high,” CMC Markets analyst Tina Teng said.
Investors are focused on the US employment report to be released later today, which is expected to show nonfarm payrolls increased by 250,000 jobs last month, after rising by 372,000 jobs in June.
Any signs of strength in the labour market could feed into fears of aggressive steps by the US Federal Reserve to curb inflation.