Brent crude futures were falling 38 cents, or 0.3%, at $119.13 barrel at 0926 GMT.
U.S. West Texas Intermediate (WTI) crude futures were under 25 cents, or 0.2%, at $118.25 a barrel; rising by over $1 per barrel earlier.
According to UBS analyst Giovanni Staunovo, risk sentiment is responsible for the drop, with European equity markets negative.
U.S. State department’s authorization for Eni and Repsol (OTC: REPYY) to start shipping Venezuelan crude to Europe from July to replace lost Russian barrels has also weighed on prices in recent days.
But analysts expect the sluggish price action to be short-lived; Beijing and commercial hub Shanghai have been returning to normal in recent days after two months of painful lockdowns to stem outbreaks of the Omicron variant.
Further bullish sentiment followed analyst doubts that last week’s production policy decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, would alleviate tight supply.
Will Oil Balance Improve?
The group’s decision to bring forward oil production to 648,000 barrels per day (BPD) in July and August is unlikely to improve the global oil balance; members struggle to achieve quota increase and as the rise is lower than the loss of Russian crude oil, analysts said. Saudi Arabia itself probably acknowledges this, PVM Oil’s Tamas Varga said.
Top oil exporter Saudi Arabia raised the July official selling price (OSP) for its flagship Arab Light crude to Asia by $2.10 from June to a $6.50 premium over Oman/Dubai quotes.
Analysts said that the quota increase from OPEC+ also fails to address the shortage in oil products.
According to Jeffrey Halley, a senior Asia Pacific market analyst at OANDA, refining margins globally suggest that demand for petrol and diesel remain in heavy order, with the refining logjam in refined products backstopping crude prices.
Elsewhere, U.S. crude inventories likely fell last week; meanwhile, gasoline and distillate stockpiles were up.