Oil prices calmed in Asian trade on Friday after hitting their lowest levels before Russia’s invasion of Ukraine in February.
Brent crude rose 13 cents, or 0.1%, to $94.25 per barrel as of 0330 GMT, while West Texas Intermediate (WTI) crude rose 27 cents, or 0.3%, to $88.81 per barrel.
Oil prices have come under pressure this week as the market worries about the impact of inflation on economic growth and demand, but the reality of tight supply keeps prices grounded.
For September, OPEC+ is set to increase its oil production target by 100,000 barrels per day. According to OPEC data, the increase is one of the smallest since the OPEC quotas were introduced in 1982.
OPEC’s insufficient supply growth shows the market has a long way to go in dealing with shortages.
Global crude oil markets remained in a backwardation market where early delivery prices were higher than in the coming months, indicating tight supply.
Supply concerns are expected to escalate sooner than winter, with the European Union’s sanctions banning the importation of Russian crude oil and petroleum products by sea on December 5.
With the EU halting Russian imports by sea, important question marks remain over whether Middle Eastern manufacturers will redirect their products to Europe to fill the void.
How the sanctions policy on Russian oil products will proceed is the most important issue for the rest of the year.
Signs of economic slowdown limited the recovery of prices. Recession concerns intensified after the Bank of England warned of a recession following the highest rate hike since 1995.
If commodities are not priced in an imminent recession, they may be preparing for a period of ‘stagflation’ when the unemployment rate begins to rise and inflation remains high.
Investors are focused on the US jobs report, which will be released later in the day.
Any signs of strength in the labor market could feed fears about the US Federal Reserve’s aggressive moves to curb inflation.
