Tight supplies have been exacerbated by declining exports from Libya amid a political crisis affecting production and ports.
Oil prices fell on Tuesday on fears that the US Federal Reserve will hike interest rates higher than expected.
Most Fed watchers had expected the US central bank to hike rates by 50 basis points at its meeting on Wednesday. But after Friday’s surprisingly strong Consumer Price Index (CPI) data for May, an increase of 75 basis points is expected.
Brent crude futures were down $1.10, or 0.9%, at $121.17 a barrel. US West Texas Intermediate (WTI) crude fell $2, or 0.7%, to $118.93 a barrel
“This fear of a basic point hike is driving equities and oil down,” said John Kilduff, partner at Again Capital LLC in New York.
Oil prices were pressured by reports an aide told Reuters that US Senate Finance Committee Chairman Ron Wyden plans to introduce legislation to levy a 21% higher tax on oil company profits.
The aide said the bill would impose a 21% additional tax on excess profits from oil and gas companies with more than $1 billion in annual revenue.
Tight supplies have been exacerbated by declining exports from Libya amid a political crisis affecting production and ports.
Other OPEC+ producers are struggling to meet production quotas and Russia is facing sanctions on its oil over the war in Ukraine.
The US Department of Energy (DOE) also announced a fourth notice of the sale of 45 million barrels of crude oil from the Strategic Petroleum Reserve.
UBS raised its Brent price estimate to $130 a barrel at the end of September and $125 for the subsequent three quarters, from $115 earlier.
“The risk of supply growth due to low oil inventories, dwindling excess capacity, and increased demand in the coming months has prompted us to raise our oil price forecast,” the bank said.
Rating agency Fitch raised Brent and WTI price estimates by $5 to $105 and $100 a barrel, respectively, for 2022.
Markets were awaiting weekly reports from the American Petroleum Institute on Tuesday and the US Energy Information Administration on Wednesday for US crude oil and fuel inventory data.
Six analysts polled by Reuters estimated US crude inventories fell by 1.2 million barrels last week, while gasoline stockpiles by 800,000 barrels and distillate inventories, which include diesel and heating oil, were unchanged.
On the demand side, Beijing’s latest COVID outbreak has raised fears of a new phase of lockdown at a time in Beijing.
In its monthly report, the Organization of the Petroleum Exporting Countries maintained its forecast that world oil demand will exceed pre-pandemic levels in 2022, but said Russia’s invasion of Ukraine and developments related to the coronavirus pandemic pose significant risks. We do.
OPEC representatives and industry sources told Reuters that the group sees demand growth slowing next year, as rising oil prices help push inflation and act as a drag on the global economy.
(Additional reporting by Ahmed Ghadar in London, Sonali Paul and Isabel Kua in Singapore; Editing by David Gregorio, Jason Neely, Louise Heavens, Margarita Choy and Deepa Babington)
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