July 7 (Reuters) – Oil prices regained a footing on Thursday from steep falls in the previous two sessions, as investors returned their focus to tight supplies even as fears persisted over the demand outlook amid risks of a global recession.
Brent crude futures rose 67 cents, or 0.7%, to $101.36 a barrel by 0402 GMT after tumbling more than $2 to a session low of $98.50 earlier. WTI crude futures climbed 59 cents, or 0.6%, to $99.12 a barrel, bouncing from an intraday low of $96.57.
“Recession fears continue to grow and that obviously does raise some concerns for the demand outlook,” Warren Patterson, ING’s head of commodity research said.
“However, supportive fundamentals should mean that further downside is relatively limited.”
He added that it’s hard to be overly bearish on oil prices as the Brent monthly spreads remain in wide backwardation, indicating tight supplies. Prompt-month prices are higher than those in future months in a backwardated market.
Also, “recent Iranian nuclear talks don’t appear to have achieved much”, Patterson said.
Washington tightened sanctions on Iran on Wednesday, pressuring Tehran as it seeks to revive the 2015 Iran nuclear deal.
Eurasia Group, a consultancy, reduced the odds of an agreement between the United States and Iran this year to 35% from 40%, saying Tehran is “likely ambivalent” about a deal.
Oil prices have slid alongside other commodities such as metals and palm oil as central banks across the world raised interest rates over the past few months to battle inflation, fanning fears of recession and a hit to demand for commodities.
Brent and WTI closed on Wednesday at their lowest since April 11. The declines follow a dramatic fall on Tuesday despite tight global supplies. WTI slid 8% while Brent tumbled 9% – a $10.73 drop that was the third biggest for the contract since it started trading in 1988.
“With commodity traders turning very risk-averse due to growing demand and still hawkish (U.S.) Fed policy concerns, the recessionary headline risk is like an anvil around the market’s neck,” said Stephen Innes, managing partner of SPI Asset Management.
Traders are watching for possible oil supply disruption at the Caspian Pipeline Consortium (CPC), which has been told by a Russian court to suspend activity for 30 days. Exports at CPC, which handles about 1% of global oil supplies, were still flowing as of Wednesday morning.
In addition, investors are awaiting U.S. government data due on Thursday that will shed light on the state of domestic oil and fuel inventories.
Industry data on Wednesday showed that U.S. crude inventories rose by about 3.8 million barrels last week, according to market sources. Gasoline inventories fell by 1.8 million barrels, while distillate stocks fell by about 635,000 barrels.
Reporting by Florence Tan in Singapore and Stephanie Kelly in New York; Editing by Kenneth Maxwell, Simon Cameron-Moore & Shri Navaratnam