Brent oil prices moved slightly on Tuesday, reversing a previous $1 gain as investors worry about a potential production cut in Norway and a possible global recession that will cut fuel demand.
Brent futures for September delivery rose 0.2%, or 22 cents, to $113.73 a barrel.
US West Texas Intermediate crude rose $1.95, or 1.8%, to $110.38 a barrel from Friday’s close. There were no WTI settlements on Monday due to the celebration of Independence Day in the USA.
“While there are demand concerns given the gloomier macro outlook, the market is still expected to be tight for the remainder of the year,” wrote Warren Patterson, head of Commodity Strategy from ING, in a note.
On Tuesday, Norwegian offshore workers went on strike that will cut oil and gas production.
The strike is expected to cut oil and gas production by 89,000 boepd, of which gas production will be 27,500 boepd, Norwegian producer Equinor said.
Oil production will fall by as much as 130,000 bpd from Wednesday, the country’s oil and gas association predicted on Sunday. It is estimated that this will represent about 6.5% of Norway’s production.
News of improved activity in the services sector of the economies of Japan and China, one of the world’s largest oil importers, helped prices slightly on Tuesday.
China’s Caixin Purchasing Managers’ Index (PMI) showed a three-month decline in June and rose at the fastest pace in almost a year, while Jibun Bank Japan’s final PMI posted the fastest gain since October 2013 last month.
Investors are also increasingly concerned about demand amid global financial conditions as the US Federal Reserve fights inflation with rapid interest rate hikes.
Interest rate hikes are also planned in Australia and South Korea as the authorities try to tamp down inflation. In South Korea, inflation reached a nearly 24-year high in June, fueling fears of a slowdown in economic growth and oil demand.
“Oil is still struggling to break out of the current recession-driven crisis as the market moves from inflation to economic desperation,” said Steven Innes of SPI Asset Management.
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