Oil Prices Resurge To $120 A Barrel On Tight Supplies; After Steep Drop

Oil prices recovered on Thursday from a steep drop in the previous session, supported by tight oil supply and peak summer consumption, after a U.S. rate hike sparked fears of slower economic growth and less fuel demand.

Brent crude futures rebounded $1.10, or 0.9%, to $119.61 a barrel by 0202 GMT while U.S. West Texas Intermediate (WTI) crude futures rose to $116.59 a barrel, up $1.28, or 1.1%.

Prices slipped more than 2% overnight after the Federal Reserve raised interest rate by three-quarters of a percentage point, the biggest hike since 1994.

The dollar index came off from its highest since 2002 on Wednesday, easing downward pressure on oil prices. A stronger greenback makes U.S. dollar-priced oil more expensive for holders of other currencies, curtailing demand.

Investors remained focused on tight supplies and robust demand as Western sanctions restricted access to Russian oil, while optimism that China's oil demand will rebound as it eases COVID-19 restrictions supported the price outlook.

"A rebound in China demand sentiment, and expected seasonal ramp-up in OECD oil demand into August leaves price risk to the upside through 3Q 2022," said Baden Moore, head of commodities research at the National Australia Bank.

U.S. crude production, which has been largely stagnant over the last few months, edged up 100,000 barrels per day last week to 12 million bpd, its highest level since April 2020, data from the Energy Information Administration showed. [EIA/S]

U.S. crude stocks and distillate inventories rose while gasoline inventories fell in the week through June 10, the EIA said.

(Reporting by Florence Tan in Singapore and Sonali Paul in Melbourne; editing by Richard Pullin)