Oil prices try to claw back on supply fears

July 12 (UPI) -- Crude oil prices recovered some of the ground lost during Wednesday's sharp downturn after the IEA warned supplies may be "stretched to the limit."

The price for Brent crude oil dropped roughly 6 percent in Wednesday trading for one of the sharpest declines in years. The drop was in response to concerns about global trade tensions and an announcement from Libya that oil production was recovering after weeks of unrest.

The International Energy Agency said Thursday it was still unclear if Libyan stability was ensured. In the meantime, labor action offshore Norway, interruptions at a Canadian oil processing facility and seasonal maintenance issues were just some of the factors constricting the global supply of oil.

"Some of these supply issues are likely to be resolved, but the large number of disruptions reminds us of the pressure on global oil supply," the IEA's report read. "This will become an even bigger issue as rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world's spare capacity cushion, which might be stretched to the limit."

The price for Brent crude oil, the global benchmark, was up 1 percent as of 9:18 a.m. EDT to $74.14 per barrel. It closed Tuesday at $78.88 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.34 percent to $70.62 per barrel.

Spare capacity refers to the ability of a producer to put more oil on the market in short order. There are only a handful of producers, namely Saudi Arabia, with any real spare capacity and the IEA said there are few signs the situation will improve.

"This vulnerability currently underpins oil prices and seems likely to continue doing so," the report read.

Those concerns come amid looming fears that trade tensions will undermine long-term economic growth. U.S. President Donald Trump was given a cool reception at a NATO summit this week in a sign of growing European frustration with his theatrical style of leadership. Along with China, Europe is a target of U.S. trade frustration.

Trump says that legacy trade relationships have been unfavorable for the United States. Commentary published Thursday in China's official Xinhua News Agency challenged that perception.

"The administration's worldview will be proved wrong," it read. "Doing so, however, will be highly costly for people around the world, including Americans."

The U.S. economy, however, continues to show strength. The U.S. Labor Department reported Thursday that first-time claims for unemployment for the week ending July 7 was 214,000, a decline of 18,000 from the previous week.