Oil edged up on Wednesday, a day after it fell through $100 a barrel for the first time since April, while traders looked towards U.S. inflation data that could weaken the market.
U.S. West Texas Intermediate crude gained 28 cents, or 0.29%, to $95.94.
Investors have sold oil positions on worries that aggressive interest rate hikes to stem inflation will spur an economic downturn that will hit oil demand. Prices fell by more than 7% on Tuesday amid volatile trading.
A further concern is that U.S. interest rate rises in response to high inflation will push up the dollar, also undermining oil prices.
“Lingering recession fears continue to hit the market, whilst the strength of the USD and flare-up in Covid cases in parts of China is certainly not helping,” said Warren Patterson, head of commodities strategy at ING.
Stephen Innes, managing partner of SPI Asset Management, pointed to the expected release of possibly hot U.S. consumer price index data later on Wednesday.
Economists polled by Reuters expect the figures to show that U.S. inflation has accelerated, to 1.1% monthly and 8.8% annually.
Renewed COVID-19 travel curbs in China also weighed on the market. Multiple cities in the world’s second-biggest economy have adopted fresh restrictions, from business shutdowns to broader lockdowns, in an effort to rein in new infections from a highly infectious subvariant of the virus.
On Tuesday the dollar index, which tracks the currency against a basket of six counterparts, also climbed earlier in the day to 108.56, its highest level since October 2002.
Oil is generally priced in U.S. dollars, so a stronger greenback makes the commodity more expensive to holders of other currencies, putting downward pressure on demand and its dollar price.
U.S. crude stocks rose by about 4.8 million barrels for the week ended July 8. Gasoline inventories rose by 3 million barrels, while distillate stocks rose by about 3.3 million barrels, according to market sources citing American Petroleum Institute figures on Tuesday.
Meanwhile, market is closely watching U.S President Joe Biden’s visit in the Middle East, where he is expected to ask Saudi Arabia and other Gulf producers to raise oil output to help stabilise prices.
In a monthly report issued on Tuesday, OPEC expected that global oil demand to rise in 2023 and that the market would remain tight. It estimated that an additional 900,000 bpd of oil would be needed from its members in 2023 from 2022 to balance the market.