Oil has given up the gains seen in the wake of Russia’s invasion of Ukraine, which drove the US benchmark above $130 a barrel in March. Crude prices pose a high risk to global economic recovery, with signs that fuel costs are starting to “take their toll” on demand growth, according to a monthly report from the International Energy Agency.
The market is wrestling with “short-term downward risks due to recession fears, versus the longer-term issues with underinvestments,” said Hans Van Cleef, a senior energy economist at ABN Amro.
Concerns over an economic slowdown have overshadowed tight physical crude markets. OPEC’s first outlook for 2023 suggests that there will be no relief for squeezed consumers, with more oil needed from the group even though most members are already pumping flat out.
US President Joe Biden has repeatedly called on OPEC to pump more and is scheduled to visit Saudi Arabia this week during a tour of the Middle East. The kingdom along with the United Arab Emirates are the only cartel members with significant volumes of unused production capacity.
The American Petroleum Institute reported that US crude stockpiles rose by 4.76 million barrels last week, according to people familiar with the figures. The Energy Information Administration will report data on Wednesday.
China’s exports expanded at a faster pace than expected in June as Covid disruptions continued to ease, though concerns about virus outbreaks remain. Some residents in Shanghai have been urged to stockpile food and medicines as the fear of returning to lockdown hangs over the city.