By Zhang Mengying
Investing.com – Oil was down on Monday morning in Asia as fears of an economic slowdown outweighed the supply tightness amid lower output from the Organization of the Petroleum Exporting Countries (OPEC).
Brent oil futures inched up 0.05% to $111.66 by 1:23 AM ET (5:23 AM GMT) and crude oil WTI futures inched up 0.01% to $108.42.
“The recession fears are the primary bearish factor that has capped the surge in oil prices. Rising rates and a plunge in consumer confidence have dented the fuel demand outlook, while data shows that the U.S. petroleum refinery capacity has improved,” CMC Markets analyst Tina Teng told Reuters.
“In addition, a strong USD also weakens broad commodity markets, including crude prices.”
In the U.S. and elsewhere, signs of economic weakness are becoming more apparent with U.S. consumer sentiment dropping to a record low in June. The U.S. Federal Reserve reiterated last week its resolution to bring down inflation, increasing concerns of a recession following interest rate hikes.
Oil supply remains tight. Output from the 10 members of OPEC in June fell by 100,000 barrels per day (bpd) to 28.52 million bpd, off their pledged increase of about 275,000 bpd, according to Reuters.
“Energy markets remain laden with specific supply risks that make being short a nervy experience,” Commonwealth Bank commodities analyst Tobin Gorey told Reuters.
Drops in production from Nigeria and Libya offset increases by Saudi Arabia and other producers, and Libya faces further supply disruption due to political unrest, making OPEC less likely to meet its newly increase production quota, ANZ Research analysts said 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.