On Wednesday, oil prices rose after rising in the previous three sessions but losses were limited because of the belief that global supply tightness will continue as there is limited room for major producers such as Saudi Arabia to boost production.
U.S. West Texas Intermediate WTI crude futures slid 44 cents, or 0.4%, to $111.32 a barrel at 0150 GMT, giving up earlier gains.
In August, crude futures fell by 61 cents, or 0.5%, to $117.37 a barrel, reversing an earlier gain. The contract for August will end on Thursday, and the more active contract for September will be at $113.14, down 66 cents, or 0.6%.
Concerns over tight global supply outweighed fears that demand may slow down in a future recession, so both Brent and WTI went up more than 2% on Tuesday. The Group of Seven economic powers agreed to look at ways to limit the price of Russian oil to cap the price of oil, which underpins the market sentiment.
The investors made position adjustments but were bullish on expectations that Saudi Arabia and the United Arab Emirates wouldn't be able to raise output to meet recovering demand due to a pick-up in jet fuels, said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
As the United States enters the summer, oil prices will likely stay above $110 a barrel, he said, due to fears of potential supply disruptions due to hurricanes.
Saudi Arabia and the UAE have been seen as the only two members of the Organization of the Petroleum Exporting Countries OPEC with spare capacity to make up for lost Russian supply and weak output from other member nations.
According to French President Emmanuel Macron, the UAE's energy minister Suhail al-Mazrouei said the emirate was producing near the maximum capacity of its quota of 3.168 million barrels per day bpd, and that Saudi Arabia could increase output by only 150,000 barrels per day, which is less than the nameplate spare capacity of around 2 million barrels per day, as per the agreement with OPEC and its allies.
In 2021, OPEC's oil revenue surged as prices and demand recovered from the worst of the COVID epidemic, while the number of members of its active rigs posted a modest rebound and new completed wells declined, according to data from the group.
Political unrest in Libya and Ecuador could be a factor in the tightening of supply, according to analysts.
The inventory data in the U.S. made it seem that there was an improvement in fuel supply. Market sources cited American Petroleum Institute figures on Tuesday showed that gasoline stocks rose by 2.9 million barrels and distillate fuel supplies increased by 2.6 million barrels for the week ending June 24. The crude inventories fell by 3.8 million barrels.