Oil prices swing on Russian supply fears and economic woes

Oil

Oil prices fluctuated wildly on Wednesday as the market balanced demand worries related to looming recession risks with fears that Russia will halt all oil and gas supplies.

After session lows not seen since before Russia's invasion of Ukraine, Brent crude futures were up 2 cents, or 0.02%, at $92.85 a barrel at 1202 GMT while U.S. West Texas Intermediate crude gained 9 cents, or 0.1%, to $86.97.

Oil pared losses after Russian President President Vladimir Putin threatened to halt all oil and gas supplies if price caps are imposed on Russia's energy resources.

The European Union proposed to cap Russian gas only hours later, raising the risk of rationing in some of the world's richest countries this winter.

Analysts already expect oil supply to be tight for the last quarter of the year.

"The halt of release from the U.S. SPR (strategic petroleum reserve) coupled with the implementation of an EU embargo on Russian crude has the makings of a global supply crunch this winter," said PVM analyst Stephen Brennock.

Adding further support were expectations of tighter oil inventories in the United States.

U.S. crude stockpiles are expected to have fallen for a fourth consecutive week, declining by an estimated 733,000 barrels in the week to Sept. 2, a preliminary Reuters poll showed on Tuesday.

Weekly U.S. inventory reports from the American Petroleum Institute will be released later on Wednesday, a day later than usual because of a public holiday on Monday.

The market is also juggling bearish sentiment from the prospect of a global economic recession.

Credit rating agency Fitch on Tuesday said that the halting of the Nord Stream 1 pipeline has increased the likelihood of a recession in the euro zone.

The European Central Bank is widely expected to raise interest rates sharply when it meets on Thursday. A U.S. Federal Reserve meeting follows on Sept. 21.

Weak economic data from China amid its stringent zero-COVID policy has also added to demand woes.

The country's crude oil imports in August fell 9.4% from a year earlier, customs data showed on Wednesday.

Meanwhile, Britain's new prime minister, Liz Truss, on Wednesday said she wanted to see more extraction of oil and gas from the North Sea.