Amid the globally slowing demand for oil and recession fears, the benchmark US oil price dropped below $100 a barrel on Tuesday while continuing a rapid turnaround from soaring levels in recent months.
Goldman Sachs said global consumption was running ahead of supply, and inventories were nearing critically low levels, although Citigroup Inc has warned prices could fall below $70 a barrel, Bloomberg reported.
West Texas Intermediate was little changed after collapsing by 8% to the lowest close since late April as mounting angst about a slowdown spurred a sell-off in commodities including crude.
Brent crude futures rose as much as $3.08, or 2.9%, to $105.85 a barrel in early trade after plunging 9.5% on Tuesday, the biggest daily drop since March. It was last up 92 cents, or 0.9%, at $103.69 a barrel at 0243 GMT.
OPEC Secretary General Mohammad Barkindo said on Tuesday that the industry was "under siege" due to years of under-investment, adding shortages could be eased if extra supplies from Iran and Venezuela were allowed.
Russia's former president Dmitry Medvedev also warned that a reported proposal from Japan to cap the price of Russian oil at around half its current level would lead to significantly less oil in the market and push prices above $300-$400 a barrel.
On the other hand, the Norwegian government on Tuesday intervened to end a strike in the petroleum sector that had cut oil and gas output, a union leader and the labour ministry said, ending a stalemate that could have worsened Europe's energy crunch.
By Saturday, the strike would have cut daily gas exports by 1,117,000 barrels of oil equivalent (boe), or 56% of daily gas exports, while 341,000 of barrels of oil would have been lost, the Norwegian Oil and Gas (NOG) employers' lobby said.
Oil has opened the third quarter on a volatile footing as concerns about a potential recession rattled financial markets. With central banks including the Federal Reserve jacking up interest rates to tame inflation, investors have been pricing in the consequences of a slowdown even as physical crude markets continue to show signs of vigor and the war in Ukraine drags on.
"While the odds of a recession are indeed rising, it is premature for the oil market to be succumbing to such concerns," Goldman Sachs analysts including Damien Courvalin said in a note. "The global economy is still growing, with the rise in oil demand this year set to significantly outperform GDP growth."
A strengthening dollar has also been a headwind for commodities this week as a gauge of the US currency rallied to the highest level in more than two years, with investors shying away from risk. A rising dollar makes raw materials like oil more expensive for holders of other currencies.
Still, in China there are signs of better oil consumption as the world's biggest importer emerges from virus lockdowns that pummeled demand. Overall consumption of gasoline and diesel last month was at almost 90% of June 2019 levels, according to people with knowledge of the energy industry.
Crude had been supported in recent weeks by interruptions to supplies including in Libya, as well as declines in key US inventories. In addition, there's been evidence producers in the Organization of Petroleum Exporting Countries and allies have been unable to deliver supply increases in full.
"Prices will march higher once we get past this current bout of risk-off," Wayne Gordon, commodity and Asia Pacific currency strategist at UBS AG Wealth Management, told Bloomberg TV. "We've seen a number of issues in North Africa, we've seen OPEC potentially missing production targets. And when you look at even the demand side, it continues to remain robust if not improve."
Oil markets remain steeply backwardated, a bullish pattern in which near-term prices command a premium to longer-dated ones. Brent's prompt spread -- the difference between its two nearest futures contracts -- was $4.03 a barrel in backwardation, up from around $2.50 a barrel a month ago.
In Russia, meanwhile, there's scope for an interruption to exports on top of sanctions imposed by the US and other nations. A Russian court has ordered the Caspian Pipeline Consortium to halt Black Sea oil loadings for 30 days due to violations of a spill-prevention plan. It's not clear when that period will start.