Oil prices stabilize after falling to almost 6 months

FILE PHOTO – A PetroChina worker inspects a pump cylinder at an oilfield in Tacheng, Xinjiang Uyghur Autonomous Region, China June 27, 2018. REUTERS/Stringer AT

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  • Tight global supply offers price support – analysts
  • OPEC+ agrees to raise oil production target by 100,000 bpd
  • Oil prices will trade between $90 and $100/barrel – analysts

LONDON, Aug 4 (Reuters) – Oil prices were broadly flat on Thursday as the market weighed tight supply against demand fears, after a surge in U.S. crude and gasoline inventories pushed down price at multi-month lows in the previous session.

Brent crude futures rose 36 cents, or 0.37% to $97.14 a barrel at 09:25 GMT, while West Texas Intermediate (WTI) crude futures rose 43 cents , a gain of 0.47%, to $91.09.

Both benchmarks fell Wednesday to their lowest levels since before Russia invaded Ukraine on Feb. 24, which Moscow calls “a special operation.”

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The move follows an unexpected increase in U.S. crude inventories last week. Gasoline inventories, the proxy for demand, also showed a surprise increase as demand slowed, the Energy Information Administration said. Read more

Wednesday’s decision by the Organization of the Petroleum Exporting Countries and its allies such as Russia, known as OPEC+, to raise its oil production target by 100,000 barrels per day (bpd) in September bolstered bearish sentiment. Read more

“The largely symbolic increase obviously won’t provide a significant buffer to a possible supply shock, but the oil balance won’t tighten either,” said Tamas Varga of oil broker PVM.

While the increase equates to just 0.1% of global demand, the demand outlook remains clouded by growing fears of economic collapse in the United States and Europe, debt overhangs in emerging market economies and a strict zero COVID-19 policy in China, the world’s largest oil importer.

Still, the group’s limited spare capacity, which it highlighted in a statement on Wednesday, provides a floor for oil prices.

“We believe that (limited spare capacity) will effectively lead to an increase in production of only a third of the volumes agreed in September,” said Giovanni Staunovo, oil analyst at UBS.

Edward Moya, principal analyst at OANDA, said he expects prices to rise even in a deteriorating economic backdrop.

“Crude prices are likely to find strong support around the $90 level and will eventually rebound towards the $100 per barrel level even as the global economic slowdown gathers pace,” he said.

Additional price support came from the Caspian Pipeline Consortium (CPC), which connects Kazakh oilfields to Russia’s Black Sea port of Novorossiysk, and which said on Wednesday supplies were down significantly. Read more

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Additional reporting by Laura Sanicola and Emily Chow Editing by Tomasz Janowski

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Julio V. Miller