Oil prices dipped below $60 a barrel yesterday for the first time since January after a surprise increase in stockpiles in America.
That trumped an earlier reading from the American Petroleum Institute that suggested stockpiles rose by 3.5 million barrels in the week.
Oil prices fell on Wednesday, with West Texas Intermediate crude futures (WTI) dropping to its lowest since January after USA crude inventories unexpectedly surged, adding to concerns about slowing global growth.
Brent crude futures rose $1.04, or 1.7%, to $61.67/Bbl Thursday.
"High compliance to OPEC's oil production deal and lower on-land oil inventories over the coming months should lead to supply-and-demand deficits in the second and third quarters, putting renewed upward pressure on prices", Swiss investment bank UBS said in its report. Supply has also been limited by USA sanctions on oil exports from Iran and Venezuela.
USA commercial crude inventories also rose to their highest since July 2017.
Oil is teetering on the edge of a bear market after falling nearly 20% from a peak in late April as an aggressive USA trade policy stokes fears that the global economy is headed for a sharp slowdown.
US West Texas Intermediate crude futures were up 50 cents, or one per cent, at $53.09 per barrel, after trading as high as $53.33.
But investors are still anxious about trade tensions that could stall the global economy, including the dispute between the United States and China.
Brent, the global benchmark for oil, fell below the key $60 per barrel support level Wednesday after a big surprise build in US crude stockpiles, triggering questions on how much more production OPEC could cut to save a market plunging deeper into bear-market territory. The comments reinforce the likelihood that OPEC+ will roll over the production cuts when they meet in Vienna in a few weeks, extending the supply agreement for the rest of the year.
"Worries about demand destruction are really driving prices lower", said Gene McGillian, vice president of market research at Tradition Energy. The group plans to decide later this month or in early July whether to continue the supply curbs.
USA crude oil production rose to a record 124.4 million barrels per day (bpd) in the week to May 31, the Energy Information Administration (EIA) said on Wednesday, an increase of 1.63 million bpd since May 2018.
Though demand for oil is still up on a global level, economic concerns are also growing.
"We see trade tensions spilling over via direct linkages such as trade, commodities and tourism, and indirect linkages such as tighter financial conditions weakening private sector sentiment and spending", Morgan Stanley said.