© Reuters. FILE PHOTO: An oil pumping unit is seen burning unusable gas behind it in Sakir, south of Manama, on October 11, 2014. REUTERS/Hamad I Mohammed
NEW YORK (Reuters) – Oil prices were mixed on Thursday as fears of a global recession that could hit energy demand offset a draw in crude inventories and a rebound in U.S. gasoline consumption.
Futures were up 28 cents at $106.90 a barrel at 1:17 p.m. ET (1716 GMT), having gained $2.22 on Wednesday.
U.S. West Texas Intermediate (WTI) crude fell 58 cents to $96.68 a barrel, after rising $2.28 in the previous session.
Prices pared gains in early trade after the U.S. Commerce Department reported the world’s largest economy unexpectedly contracted in the second quarter, adding to concerns that a recession could hit energy demand. Consumer spending rose at the slowest pace in two years and business spending fell.
“When we look at the recession data, if there’s a slowdown at this point, it’s a small slowdown,” said Phil Flynn, an analyst at Price Futures Group. “If you look at the demand and supply data for oil, our supply is well below average. levels, and demand has performed better than expected.”
Investors focused on Wednesday’s inventory data, which showed that oil inventories fell by 4.5 million barrels last week, below expectations for a 1 million-barrel drop, while U.S. gasoline demand rebounded 8.5% on a weekly basis, data from the Energy Information Administration (EIA) showed . [EIA/S]
“The U.S. cemented its position as the world’s largest oil exporter,” Citi analysts said in a note, with combined crude and refined product exports hitting a record 10.9 million barrels per day.
U.S. crude oil exports hit a record 4.5 million bpd as WTI traded at a steep discount to Brent. However, executives said this week that U.S. crude production growth could stall due to a lack of fracking equipment and workers and capital constraints, a bullish sign.
An energy supply war between the West and Russia further supported prices. The G7’s richest economies are aiming for a price cap on Russian oil exports by Dec. 5, a senior G7 official said on Wednesday.
Meanwhile, Russia has cut gas supply to its main gas pipeline Nord Stream 1 with Europe to just 20% of capacity. That could lead to a near-term shift from natural gas to crude and support prices, analysts said.
“We add 700,000 bpd to our aggregate estimate of additional oil demand shifting from gas to oil between October 2022 and March 2023,” JPMorgan analysts said in a note.
However, this could be offset by the normalisation of Libyan supplies, leading to a largely balanced global oil market in the fourth quarter, followed by a 1 million bpd build in inventories in the first quarter of 2023, they added.
Eight sources said OPEC and its allies will consider keeping September oil output unchanged when they meet next week, despite U.S. calls for more supply, although modest increases are also likely to be discussed.
The Federal Reserve raised its benchmark overnight interest rate by three-quarters of a percentage point on Wednesday, as expected, to cool inflation.