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Oil prices rebound as new Iran sanctions fuel more supply concerns

The market had been lower earlier as interest rate hikes in the United States, Britain and Switzerland fed concerns about a slowdown in global economic growth.

Crude Oil Prices | US-Iran tensions | US Federal Reserve

Reuters  |  NEW YORK 

oil, crude (Photo: Bloomberg)
(Photo: Bloomberg)

By David Gaffen

NEW YORK (Reuters) - Oil prices rebounded from earlier losses after the United States announced new sanctions on Iran, and as supply concerns remain at the forefront for energy that have seen prices soar throughout the year.

The market had been lower earlier as interest rate hikes in the United States, Britain and Switzerland fed concerns about a slowdown in global economic growth.

Brent crude futures were down 45 cents, or 0.4%, to $118.07 as of 12:21 p.m. EDT (1621 GMT) while West Texas Intermediate (WTI) crude futures rose 27 cents to $115.55 a barrel.

Analysts said the decision by the United States to impose sanctions on Chinese, Emirati and Iranian firms that help export Iran's petrochemicals boosted buying, as it underscores the difficulty of a revival of the 2015 U.S.- nuclear accord.

In addition, Libya's oil output has collapsed to 100,000-150,000 barrels per day (bpd), a fraction of the 1.2 million bpd seen last year, and analysts remain concerned that country could have ongoing problems delivering oil amid unrest.

That is hitting already-tight supply, while the Energy Agency said it expects demand to rise further in 2023, growing by more than 2% to a record 101.6 million bpd.

Prices slipped more than 2% overnight after the U.S. Federal Reserve raised its key interest rate by 0.75%, the biggest hike since 1994.

"Once you raise rates that high also and you know it's going to happen for next month, a lot of retail customers have tough time trading once you start increasing their costs of trading," said Robert Yawger, director of energy futures at Mizuho in New York.

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.

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.

Still, Bernstein estimated global inventory levels at 48 days of demand cover, below the long-term average of 55 days.


(Additional reporting by Shadia Nasralla in London; Editing by Marguerita Choy)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Thu, June 16 2022. 22:32 IST