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Brent futures dipped 1 cent to $79.39 a barrel by 1039 GMT, and
U.S. West Texas Intermediate (WTI) crude edged 8 cents higher to
$74.91 a barrel.
"Fundamentally, we should reach a supply deficit situation in
the third quarter, but whether that is trumped by recession
concerns and cautious sentiment around rate hikes remains to be
seen," DBS Bank's lead energy analyst Suvro Sarkar said.
U.S. inflation data later on Wednesday will provide clues on the
interest rate outlook in the world's biggest economy.
Markets expect one more rise, but that the U.S. rate-hiking
cycle is peaking. Higher rates can slow economic growth and
reduce oil demand.
U.S. crude inventories rose about 3 million barrels in the week
to July 7, market sources said, citing American Petroleum
Institute industry figures. Analysts polled by Reuters expected
a 500,000-barrel rise in crude stocks.
Nevertheless, forecasts from the U.S. Energy Information
Administration (EIA) and the International Energy Agency (IEA)
point to the market tightening into 2024.
Meanwhile, The IEA expects the oil market should stay tight in
the second half of 2023, citing strong demand from China and
developing countries combined with supply cuts from leading
producers. New forecasts from the IEA are expected this week.
"The oil balance gets tighter either when supply is downgraded,
or demand is revised up. If both happens at the same time the
change can be seismic," said PVM analyst Tamas Varga referring
to the EIA's outlook.
"Clearly, it is not worried about inflation-induced recession
that could potentially dent global oil consumption."
Oil prices are also being supported by a weaker dollar and
optimism surrounding Chinese stimulus, noted Fiona Cincotta,
senior financial markets analyst at City Index.
Top producer Saudi Arabia pledged last week to extend a
production cut of 1 million bpd in August, while Russia will cut
exports by 500,000 bpd.
(Reporting by Natalie Grover in London; Additional reporting by
Laura Sanicola and Trixie Yap; Editing by Clarence Fernandez,
Sonali Paul and Barbara Lewis)
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