Oil Prices Increase Following Multi-Month Lows

By Shariq Khan
NEW YORK (Reuters)
Oil prices settled higher on Tuesday, recovering from multi-month lows reached in the previous session. Investor focus shifted towards supply tightness as financial markets improved.

Brent crude futures rose by 18 cents, or 0.2%, closing at $76.48 a barrel, while U.S. West Texas Intermediate futures gained 26 cents, or 0.4%, settling at $73.20 per barrel. Both benchmarks ended a three-session decline.

Concerns about escalating tensions in the Middle East have intensified following Iran’s threats of retaliation against Israel and the U.S. after two militant leaders were killed. This situation could potentially disrupt regional oil supplies.

Additionally, Libya’s Sharara oilfield, with a capacity of 300,000 bpd, announced a gradual reduction in production due to protests, further elevating supply concerns. The National Oil Corp of Libya confirmed the decrease on Tuesday.

Recent drops in crude oil and fuel inventories in major trading hubs also contributed to rising oil prices. UBS analyst Giovanni Staunovo noted, “Oil fundamentals still suggest an undersupplied market, with inventories continuing to fall.”

In the U.S., gasoline demand likely exceeded 9 million barrels per day last week, boosting economic confidence, according to Staunovo.

Global oil inventories dropped by about 400,000 bpd in the first half of this year, with estimates from the U.S. Energy Information Administration (EIA) predicting an additional decline of around 800,000 bpd in the year’s second half. The EIA has revised its average oil price forecasts downwards for this year and next, citing economic concerns, yet still anticipates rising prices in the near future, predicting Brent spot prices between $85 and $90 per barrel by year-end.

On Monday, Brent futures hit their lowest point since early January, and WTI futures reached their lowest since February, following a global stock market decline resulting from recession fears in the U.S., the world’s largest petroleum consumer.

However, Goldman Sachs maintains that the risk of recession is limited, believing that oil prices will stabilize due to robust demand in the West and India.