Oil prices moved higher in early Asian trade on Thursday, with benchmarks partially recovering from a nearly 2% drop in the previous session. Markets are weighing a mix of demand softness and supply-risk developments, with the looming sanctions deadline for Russian oil helping to keep prices up.
At the time of writing, Brent futures had climbed by about 16 cents, or 0.25%, to $63.67 a barrel, while U.S. West Texas Intermediate rose around 17 cents, or 0.29%, to $59.42 a barrel.
Today’s modest price increase followed a plunge on Wednesday after reports of renewed diplomatic efforts to end Russia’s war in Ukraine, including a drafted framework for peace talks. This report increased the risk of Russian supply coming back online, which reinforced lingering oversupply concerns.
The rebound, meanwhile, is largely driven by traders remaining focused on the looming U.S. deadline to wind down operations with major Russian oil producers Rosneft and Lukoil by November 21, which could see even more oil coming offline. The EIA’s surprise report of an inventory build on Wednesday also added some upward pressure to oil prices, although markets remain focused primarily on Russia.
Despite the rebound, the demand outlook remains weak with markets still grappling with high inventories and global growth jitters. The supply side is functioning as a partial offset, but unless demand shows signs of firming, upside will likely remain limited.
Traders are focused on supply concerns in the short term, but a meaningful demand-side development will be required to truly spark a longer-term rally.
By Charles Kennedy for Oilprice.com
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