U.S. West Texas Intermediate (WTI) crude eased 4 cents to $120.89 a barrel at 0156 GMT, while Brent crude futures dipped 6 cents to $122.21 a barrel.
“Discussion within the oil complex still revolves around Libya’s decline in production, China continuing to impose measures to slow the spread of COVID, and concerns around global recession woes driving demand destruction,” said Stephen Innes, managing partner at SPI Asset Management.
Supply tightness has been aggravated by a drop in exports from Libya amid a political crisis that has hit output and ports, while other producers in OPEC+ struggle to meet their production quotas and Russia faces bans on its oil over the war in Ukraine.
ANZ Research analysts cited Libya’s oil minister Mohamed Aoun saying production in the country has dropped to 100,000 barrels pre day from 1.2 million bpd last year.
On the demand side, the focus is on China, where a COVID outbreak at a bar in Beijing has raised fears of a new phase of lockdowns just as restrictions were being eased.
Unlike other risk assets, the oil market has shrugged off recession fears so far.
“For now the perceived tightness in oil supply is lending resilience to oil prices,” said Commonwealth Bank commodities analyst Tobin Gorey.
The market will be awaiting weekly U.S. inventory data from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday for a view on how tight crude and fuel supply remain.
Six analysts polled by Reuters expect U.S. crude inventories fell by 1.2 million barrels in the week to June 3, while forecasting that gasoline stockpiles rose by about 800,000 barrels and distillate inventories, which include diesel and heating oil, were unchanged.