Oil wobbles as global economic worries offset tightening supply

Oil pumping jacks, also known as "nodding donkeys", in an oilfield near Neftekamsk, in the Republic of Bashkortostan, Russia, Nov. 19, 2020. Photographer: Andrey Rudakov/Bloomberg

Oil prices edged down on Monday, reversing earlier gains, as concerns about slowing global economic growth and fuel demand offset worries about tightening supplies.

Brent crude futures slipped 8 cents, or 0.1%, to $113.04 a barrel by 0242 GMT, after rising as much as 1% earlier. Front-month prices tumbled 7.3% last week, its first weekly fall in five.

U.S. West Texas Intermediate crude was at $109.49 a barrel, down 7 cents, after rising more than $1 earlier. Front-month prices dropped 9.2% last week, the first decline in eight weeks.

"Clearly macro factors are driving oil at the moment, rather than fundamentals, which are still supportive," Warren Patterson, ING's head of commodities research said.

Oil from Russia, the world's second-largest exporter, remains out of reach to most countries because of Western sanctions over the war in Ukraine.

The impact has been partly mitigated by the release of strategic petroleum reserves, led by the United States, and a ramp-up of production from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, although that is thinning the world's buffer against further supply disruption.

"If Washington sticks to its current pace, the U.S. strategic reserve will hit a 40-year low of 358 million barrels by October," ANZ analysts said in a note.

Still, U.S. oil and gas production is climbing.

The oil and gas rig count, an early indicator of future output, rose by seven to 740 in the week to June 17, its highest since March 2020, energy services firm Baker Hughes Co said in its report on Friday.

In Libya, oil production remained volatile following blockades by groups in the country's east.

The Libyan Oil Minister Mohamed Oun told Reuters on Monday that the country's total production is at about 700,000 barrels per day (bpd). Libya's output had fallen to 100,000 to 150,000 bpd, a spokesman for the oil ministry said last week.

Oil products exports from China, once a major exporter, continued to decline, keeping global supplies tight.

The country's gasoline exports in May fell 45.5% from a year earlier and diesel exports plunged 92.7% despite stalling domestic demand, as companies ran short of export quotas, Chinese customs data showed on Saturday.