Oil prices rebounded from earlier losses after the United States announced new sanctions on Iran, and as supply concerns remain at the forefront for energy markets that have seen prices soar throughout the year.
The market had been lower earlier as interest rate hikes in the United States, Britain and Switzerland fed concerns about a slowdown in global economic growth.
Brent crude futures were down 45 cents, or 0.4%, to $118.07 as of 1621 GMT while West Texas Intermediate (WTI) crude futures rose 27 cents to $115.55 a barrel.
Analysts said the decision by the US to impose sanctions on Chinese, Emirati and Iranian firms that help export Iran’s petrochemicals boosted buying, as it underscores the difficulty of a revival of the 2015 US-Iran nuclear accord.
In addition, Libya’s oil output has collapsed to 100,000-150,000 barrels per day (bpd), a fraction of the 1.2 million bpd seen last year, and analysts remain concerned that the country could have ongoing problems delivering oil amid unrest.
That is hitting the already tight supply, while the International Energy Agency said it expects demand to rise further in 2023, growing by more than 2% to a record 101.6 million bpd.
Prices slipped more than 2% overnight after the US Federal Reserve raised its key interest rate by 0.75%, the biggest hike since 1994.
“Once you raise rates that high also and you know it’s going to happen for next month, a lot of retail customers have tough time trading once you start increasing their costs of trading,” said Robert Yawger, Director of Energy Futures at Mizuho.
European stocks tumbled after a surprise rate hike from Swiss National Bank. This was followed by a rate hike by the Bank of England.
Optimism that China’s oil demand will rebound as it eases Covid-19 restrictions is also supporting the price outlook. “Looking into next year, there is a clear deficit in supply. While a recession could yet come along to change this, the current set-up remains bullish for the oil price and oil stocks,” Bernstein analysts said in a note.
Published in The Express Tribune, June 17th, 2022.
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