Oil prices erased early gains to head lower on Thursday, a day after a fall triggered by a U.S. interest rate hike, though tight supply limited losses.
Brent crude futures were down 45 cents, or 0.4%, to $118.06 a barrel by 0906 GMT while U.S. West Texas Intermediate (WTI) crude futures fell 44 cents to $114.87, also off 0.4%.
Both contracts broadly stayed within the previous session’s range.
Prices slipped more than 2% overnight after the Federal Reserve raised its key interest rate by 0.75%, the biggest hike since 1994.
The dollar index retreated from a 20-year high, easing downward pressure on oil prices. A stronger greenback makes U.S. dollar-priced oil more expensive for holders of other currencies, curtailing demand.
Investors remained focused on tight supplies as Western sanctions restricted access to Russian oil.
In Libya, oil output has collapsed to 100,000-150,000 barrels per day (bpd), a spokesman for the oil ministry said on Tuesday, a fraction of the 1.2 million bpd seen last year.
That is hitting 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.
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.
U.S. crude stocks and distillate inventories rose while gasoline inventories fell in the week through June 10, the Energy Information Administration said. [EIA/S]
Still, Bernstein estimated global inventory levels at 48 days of demand cover, below the long-term average of 55 days.