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Oil prices reverse losses, gain on tight supply concerns

THE STAR – Oil prices reversed losses and edged up yesterday as concerns of tight supply amid lower Organization of the Petroleum Exporting Countries (OPEC) output, unrest in Libya and sanctions on Russia outweighed fears of a global recession. Brent crude futures for September rose 55 cents, or 0.5 per cent, to USD112.18 a barrel at 0650 GMT, after falling over USD1 in early trade.

US West Texas Intermediate (WTI) crude futures for August delivery gained 44 cents, or 0.4 per cent, to USD108.87 a barrel, after also falling USD1 earlier.

“Oil fundamentals remain supportive. Strong time spreads point to a tight market and clearly OPEC is still struggling to hit its agreed output levels,” said head of commodity research at ING Warren Patterson.

“The group appears to be battling to maintain current output levels, with production falling over June.”

Output from the 10 members of OPEC in June fell 100,000 barrels per day (bpd) to 28.52 million bpd, off their pledged increase of about 275,000 bpd, a survey showed.

Declines in Nigeria and Libya offset increases by Saudi Arabia and other large producers, and Libya faces further supply disruption due to escalating political unrest, making the likelihood of OPEC meeting its newly increased production quotas even more unlikely, said ANZ Research analysts in a note.

Libya’s exports have dropped to between 365,000 bpd and 409,000 bpd, down about 865,000 bpd compared to normal levels, the National Oil Corp said last week.

In a further hit to supply, a planned strike by Norwegian oil and gas workers this week could cut the country’s oil and condensate output by 130,000 bpd.

Fears of a global recession however are seen capping oil’s price gains, said CMC Markets analyst Tina Teng.