Oil prices rose about 1% on Wednesday, gaining back some of their losses during the previous session on concerns about energy demand after the International Monetary Fund (IMF) cut its economic growth forecasts.
However, the demand concerns have been offset by a tighter supply outlook following sanctions on Russia, the world’s second-largest oil exporter and a key European supplier, after its invasion of Ukraine.
“Higher energy prices could trigger demand rationing,” ANZ Research said in a note. “On the other hand, Chinese COVID-zero approach and strict lockdowns are keeping demand prospects subdued.”
Brent crude futures rose 96 cents, or 0.9%, to $108.21 a barrel by 00:04 GMT.
The front-month WTI crude futures contract, which expires Wednesday, rose $1.19, or 1.2%, to $103.75 a barrel. The second-month contract gained $1.18, or 1.2%, to $103.23 a barrel.
Both benchmarks fell 5.2% in volatile trading on Tuesday. [O/R]
The International Monetary Fund on Tuesday slashed its forecast for global growth by nearly a full percentage point, citing the economic impacts of Russia’s war in Ukraine, and warning that inflation was now a “clear and present danger” for many countries.
On the supply side, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, produced 1.45 million barrels per day (bpd) below its production targets in March, as Russian output began to decline following sanctions imposed by the West, a report from the producer alliance reviewed by Reuters showed.
Russia produced about 300,000 bpd below its target in March at 10.018 million bpd, based on secondary sources, the report showed.
Other outages added to the concerns about supply. Libya’s National Oil Corporation declared force majeure at the Brega oil port on Tuesday, saying it was unable to fulfill its commitments towards the oil market.