LONDON—Oil prices edged lower on June 27 in a volatile session as investors waited for any moves against Russian oil and gas exports that might come out of a meeting of leaders of the Group of Seven (G-7) nations in Germany.
The prospect of even tighter supplies loomed over the market as Western governments sought ways to cut Russia’s ability to fund its war in Ukraine, even though G-7 leaders were also expected to discuss a revival of the Iran nuclear deal, which might lead to more Iranian oil exports.
But for now, the pressing supply worries outweighed growing concerns over the potential for a global recession following a string of downbeat economic data from the United States, the world’s biggest oil consumer.
Brent crude futures declined by 28 cents to $112.84 per barrel by 9:32 a.m. GMT after rebounding by 2.8 percent on June 24. U.S. West Texas Intermediate crude was at $107.17 per barrel, down by 45 cents, or 0.42 percent, following a 3.2 percent gain in the previous session.
Both contracts fell last week for the second week in a row as interest rate hikes in key economies strengthened the dollar and fanned recession fears.
However, oil prices are well supported above $100 per barrel while the backwardation in prompt monthly spreads remained wide. Backwardation is the market structure when prompt futures prices are higher than prices for delivery in later months, indicating limited supplies.
“There seems to be a macro versus fundamentals battle going on at the moment,” said Warren Patterson, ING’s head of commodity research. “As we have seen prices come under pressure, time spreads have strengthened, suggesting the market is still tight.”
G-7 leaders, who began their meeting on June 26, are expected to discuss options for tackling rising energy prices and replacing Russian oil and gas imports, as well as further sanctions that don’t exacerbate inflation.
The G-7 will also discuss the prospect of reviving the Iran nuclear talks after the European Union’s foreign policy chief met senior officials in Tehran to try to unblock the stalled negotiations, a French presidency official said on June 26.
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