Oil rebounds after hitting 2022 lows, demand concerns cap gains

SINGAPORE  -Oil prices rebounded in Asian trade on Thursday after slumping to their lowest level this year in the previous session, though concerns of economic slowdowns weakening fuel demand continued to cap gains.

Brent crude futures were up 70 cents or 0.9 percent at $77.87 per barrel by 0500 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 74 cents or 1 percent to $72.75 per barrel.

Brent had settled on Wednesday below the year’s previous closing low touched on the first day of 2022, while U.S. West Texas Intermediate crude had fallen to a fresh yearly low.

“It could be largely an attempt for prices to stabilise after the recent sharp sell-off, but an overall cautious environment could still be in place,” Jun Rong Yeap, market strategist at IG, told Reuters on Thursday.

He added that worries about demand would remain a key overhang for oil prices, while positive catalysts including the supply-demand imbalance and China’s reopening hopes have been short-lived.

U.S. crude production rose to 12.2 million barrels per day last week, its highest level since August, the Energy Information Administration said on Wednesday.

While U.S. crude stocks fell last week, gasoline and distillate inventories surged, adding to concerns about easing demand.

Gasoline stocks grew by 5.3 million barrels in the week to 219.1 million barrels, and distillate stockpiles, including diesel and heating oil, swelled by 6.2 million barrels, the EIA said.

Helping to lift oil prices was data showing that Japan’s economy shrank less than initially estimated in the third quarter.

Loosening COVID-19 restrictions in China, among the biggest crude oil consumers in the world, also aided in steadying oil prices.

Meanwhile, Western officials are in talks with Turkish counterparts to resolve oil tanker queues off Turkey, a British Treasury official said, after the G7 and European Union rolled out new restrictions on Dec. 5 aimed at Russian oil exports.

At least 20 oil tankers continue to face delays to cross from Russia’s Black Sea ports to the Mediterranean as operators race to adhere to the Turkish rules.