Oil prices fall as fears of recession outweigh tight supply

An aerial view shows oil tanks of pipeline operator Transneft at the Kozmino crude oil terminal on the shore of Nakhodka Bay near the port city of Nakhodka, Russia, June 13, 2022. Photo taken with a drone. REUTERS/Tatiana Meel

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LONDON, June 20 (Reuters) – Oil prices fell on Monday, continuing last week’s losses as worries about slowing global economic growth overshadowed tight supply.

Brent crude futures were down 50 cents, or 0.44%, at $112.62 a barrel at 2:29 p.m. GMT. First-month prices fell 7.3% last week for their first weekly drop in five.

U.S. West Texas Intermediate crude fell 68 cents, or 0.62%, to $108.88. First-month prices fell 9.2% last week for the first drop in eight weeks.

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“The strong fall in Friday prices can be considered a late reaction to concerns about the recession that has already been weighing on the prices of other raw materials for some time,” said Carsten Fritsch, analyst at Commerzbank.

Analysts and investors said they thought that a recession was more likely after the American federal reserve approved the highest increase in interest rates on Wednesday in addition to a quarter of a century in order to contain a surge in inflation.

Similar tightening approaches by the Bank of England and the Swiss National Bank ensued last week. Read more

Brent crude futures hit their lowest level in a month on Monday, but some analysts expect the slump to be short-lived.

“Supply will remain tight and continue to support high oil prices. The norm for ICE Brent is still around the $120 per barrel mark,” said PVM analyst Stephen Brennock.

“The price had been rising over the previous month and the bullish scenario remains much more compelling,” said Craig Erlam, senior market analyst at OANDA.

Western sanctions reduced Russia’s access to oil after its invasion of Ukraine, which Russia calls a “special operation”.

While Chinese Broken Oil imports from Russia climbed 55 % compared to the previous year in May to reach a record level, supplanting Saudi Arabia as the first supplier, the export quotas of the China led to lower shipments of petroleum products.

Tight markets for refined products supported oil prices. Read more

Analysts expect limited summer increases from the organization of oil exporting countries (OPEC) and its allies, a group known collectively as OPEC+.

Libya’s oil production has remained unstable following blockades by groups in the east of the country, with output recently pegged at 700,000 a day. Read more

Meanwhile, the prospects for Iranian sanctions relief are fading, which could lead to a significant increase in the country’s crude exports. Read more

There has been some easing of tight supply with the release of strategic petroleum reserves, led by the United States. U.S. production is also up, according to rig count data from energy services firm Baker Hughes Co. Read more

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Additional reporting by Florence Tan and Isabel Kua in Singapore Editing by Jan Harvey, David Goodman and Susan Fenton

Our standards: The Thomson Reuters Trust Principles.

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