Despite a tight spot oil market, investors have sold oil futures on fears that sharp interest rate hikes to curb inflation will slow economic growth and hit oil demand. In volatile trading, prices fell more than 7% on Tuesday.
Brent crude was up 73 cents, or 0.7%, at $100.22 a barrel by 0813 GMT. U.S. West Texas Intermediate crude rose 68 cents, or 0.7%, to $96.52.
“While I don’t rule out more downside surprises, I believe the recent sell-off may have been overdone,” said Jeffrey Halley of brokerage OANDA.
Since hitting $139 in March, Brent has fallen sharply and is near its all-time high set in 2008. The re-imposition of COVID-19 restrictions in China this week weighed on the market.
“The worry is that this could lead to a lockdown,” Avatrade’s Naeem Aslam said of the development of COVID in China. “Besides that, traders are also worried about a global economic slowdown.”
Investors on Wednesday focused on U.S. consumer price data for June, which economists expect will show U.S. inflation has accelerated to 1.1% a month and 8.8% a year.
And for the oil market, the latest U.S. supply report from the Energy Information Administration will be in focus. Analysts expect crude oil and gasoline inventories to fall. [EIA/S]
However, sources on Tuesday citing data from the American Petroleum Institute, an industry group, showed crude inventories rose by about 4.8 million barrels, weighing on prices.
Markets are also eyeing U.S. President Joe Biden’s visit to the Middle East, where he is expected to ask Saudi Arabia and other Gulf producers to boost oil production to help stabilize prices.
