Oil prices fell on Wednesday as US crude inventories rose and Russia resumed pipeline exports to Europe, further easing supply concerns in a tight market.
Brent, the global benchmark for two thirds of the world's oil, was trading 2.32 per cent lower at $94.08 per barrel at 6.44pm UAE time on Wednesday. West Texas Intermediate, the gauge that tracks US crude, was down 2.46 per cent at $88.27 a barrel.
Oil prices fluctuated on Tuesday after Transneft said it suspended oil exports through the Druzhba pipe towards Hungary, the Czech Republic and Slovakia on August 4 as sanctions prevented Moscow’s transit payments to Kyiv.
"The news didn’t trigger a bull run in crude oil yesterday, though it pushed the price of American crude above the $90 mark, warning once again that upside risks prevail to the down-trending oil prices," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Meanwhile, US crude inventories rose more than two million barrels per day last week, putting further pressure on prices.
“The inventory data may have given crude another nudge lower, with API (American Petroleum Institute) reporting a surprise increase of 2.156 million barrels last week," said Craig Erlam, senior market analyst, UK and Europe, Middle East and Africa, at Oanda.
"Data from EIA (Energy Information Administration) today was expected to show a 100,000 barrel increase so we could be in for another upside surprise, which could further weigh on the price."
The signing of the Iran nuclear deal agreement could also further ease pressure on the supply side.
Nuclear deal talks in Vienna have concluded, with the EU suggesting a final text will now be put forward for the US and Iran to either agree upon or reject.
"I don't think we're at the optimistic stage yet as we've seen talks break down before when a deal appears close, but it's looking more promising than it has for many months," Mr Erlam said.
If an agreement is reached, it would "unlock the Iranian oil and give a certain relief to the tight-supply market", Ms Ozkardeskaya said.
Meanwhile, growing fears of a recession as inflation stays high as well as the continued Ukraine conflict are leading to demand concerns in the market.
"A higher inflation reading could be another downside risk as traders price in further tightening and increased recession risk," Mr Erlam said.
In July, the International Monetary Fund lowered its growth forecast for the global economy to 3.2 per cent this year, from its previous forecast of 3.6 per cent in April, in the middle of Russia’s war in Ukraine, high inflation and the Covid-19 pandemic.
The fund warned if further risks materialise and inflation rises further, global growth could decline to about 2.6 per cent and 2 per cent in 2022 and 2023 respectively, which would put growth in the bottom 10 per cent of outcomes since 1970.
"Although recession fears have dragged benchmarks below the psychologically important $100 per barrel of late, oil prices retain the propensity to lurch higher on the crystallisation of supply-side risks," said Han Tan, chief market analyst at Exinity.
"Current forecasts still point to global demand exceeding pre-Covid levels by next year, while suppliers continue to struggle under existing constraints. Still, the risk is that major economies instead experience a deeper- or longer-than-expected recession, eroding the expected global demand growth."