July 7 (Reuters) – Oil prices regained some footing on Thursday after steep losses in the previous two sessions, as investors returned their focus to tight supplies even as fears of a global recession persisted.
Brent crude futures rose 16 cents, or 0.2%, to $100.85 a barrel by 0637 GMT. WTI crude futures climbed 18 cents, or 0.2%, to $98.71 a barrel. Prices swung between about $2 in losses and gains of nearly $1 in the volatile session.
“Recession fears continue to grow and that obviously does raise some concerns for the demand outlook,” said Warren Patterson, ING’s head of commodity research.
“However, supportive fundamentals should mean that further downside is relatively limited.”
He added that it’s hard to be overly bearish on oil prices as the Brent monthly spreads remain in wide backwardation, indicating tight supplies. Prompt-month prices are higher than those in future months in a backwardated market.
Also, “recent Iranian nuclear talks don’t appear to have achieved much”, Patterson said.
Washington tightened sanctions on Iran on Wednesday, pressuring Tehran as it seeks to revive the 2015 Iran nuclear deal.
Consultancy Eurasia Group reduced the odds of an agreement between the United States and Iran this year to 35% from 40%, saying Tehran is “likely ambivalent” about a deal.
In recent weeks oil prices have slid alongside other commodities such as metals and palm oil as central banks across the world hike interest rates to battle surging inflation, fanning fears of a sharp economic slowdown and a hit to demand for commodities.
Brent and WTI closed on Wednesday at their lowest since April 11. The declines follow a dramatic fall on Tuesday despite tight global supplies. WTI slid 8% while Brent tumbled 9% – a $10.73 drop that was the third biggest for the contract since it started trading in 1988.
Consultancy FGE still expects demand to grow by about 2 million barrels per day until end of 2023 as the looming economic slowdown is partly countered by continued recoveries in mobility.
“If the forecasted recession is not severe, the crude price should remain in the $100/bbl range for the next 2-3 years,” FGE’s Fereidun Fesharaki said.
Traders are watching for possible oil supply disruptions at the Caspian Pipeline Consortium (CPC), which has been told by a Russian court to suspend activity for 30 days. Exports at CPC, which handles about 1% of global oil supplies, were still flowing as of Wednesday morning.
In addition, investors are awaiting U.S. government data due on Thursday that will shed light on the state of domestic oil and fuel inventories.
Industry data on Wednesday showed that U.S. crude inventories rose by about 3.8 million barrels last week, according to market sources. Gasoline inventories fell by 1.8 million barrels, while distillate stocks fell by about 635,000 barrels.