Oil prices were mixed as US gasoline demand rebounded but recession fears emerged

NEW YORK: Oil prices were mixed on Thursday as concerns about a potential global recession hit energy demand offsetting lower US crude inventories and a rebound in gasoline consumption.

Brent crude oil futures LCOc1 gained 52 cents to close at US$107.14 a barrel, after gaining US$2.22 on Wednesday.

US West Texas Intermediate (WTI) crude CLc1 fell 84 cents to $96.42 a barrel, after rising $2.28 in the previous session.

Prices pared gains in mid-morning trade after the US Commerce Department reported the world’s largest economy contracted unexpectedly in the second quarter, fueling concerns a recession could hurt energy demand. Consumer spending rose at the slowest pace in two years and business spending fell.

“When we look at the recession numbers, if it’s a slowdown at this point, it’s a small slowdown,” said Phil Flynn, an analyst at the Price Futures group. “If you look at the demand and supply numbers for oil, we are well below average on supply and demand holding up better than expected.”

Investors focused on US oil data from Wednesday that showed crude stockpiles fell by 4.5 million barrels last week, more than four times forecast, while gasoline demand rebounded by 8.5% week-on-week.EIA/S

“The US strengthened its position as the world’s largest petroleum exporter,” Citi analysts said in a note, as combined gross exports of crude oil and refined products reached a record 10.9 million barrels per day.

US crude oil exports hit a record 4.5 million bpd last week as WTI traded at a deep discount to Brent. However, in a bullish signal, US crude oil production growth may stall due to shortages of fracking equipment and crews, as well as capital constraints, executives said this week.

Prices got further support from the energy supply battle between the West and Russia. The Group of Seven richest economies aim to have a price cap mechanism in place on Russian oil exports by Dec. 5, a senior G7 official said.

Meanwhile, Russia has reduced gas supplies through Nord Stream 1, its main gas link to Europe, to just 20% of capacity. That could lead to a shift to crude oil from gas and raise oil prices in the short term, analysts said.

“We raise our total estimate for additional oil demand from the gas-to-oil switch by 700,000 bpd from October 2022 to March 2023,” JP Morgan analysts said in a note.

However, this could be offset by normalizing Libyan supplies, leading to a balanced global oil market in the fourth quarter, followed by a stockpile build of 1 million barrels per day in the first quarter of 2023, they added.

The Organization of the Petroleum Exporting Countries and its allies will consider keeping oil output unchanged for September when they meet next week, despite calls from the United States for more supply, although a modest increase in production is also likely to be discussed, eight sources said.

The US Federal Reserve on Wednesday raised its benchmark overnight interest rate by three-quarters of a percentage point, in line with expectations, to cool inflation.- Reuters

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