© Reuters. FILE PHOTO: Yang Mei Hu oil products tanker owned by COSCO Shipping gets moored at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia June 13, 2022. REUTERS/Tatiana Meel
By Shadia Nasralla
LONDON (Reuters) -Oil prices erased early gains to fall to two-week lows on Thursday on the back of inflation concerns highlighted by interest rate hikes in the United States, Britain and Switzerland, though tight oil supply limited losses.
futures were down $1.02, or 0.9%, to $117.49 a barrel by 1330 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell $1.17 to $114.14, off 1%.
Prices slipped more than 2% overnight after the Federal Reserve raised its key interest rate by 0.75%, the biggest hike since 1994.
On Thursday, European stocks tumbled after a surprise rate hike from Swiss National Bank. [MKTS/GLOB] This was followed by a rate hike by the Bank of England.
“Concerns about global inflation are growing. As a result, the dollar is stronger and European equities are falling, bringing oil down with them,” PVM analyst Tamas Varga said.
“This is why oil buyers are currently on the back foot but since supply issues are still very much present, I believe that the move lower, which started on Tuesday, will not be a prolonged one.”
Libyan oil output has collapsed to 100,000-150,000 barrels per day (bpd), 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.
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.
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