Oil prices steady as market weighs tight supply against recession fears

© Reuters. FILE PHOTO: Oil pump jacks are seen at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquen, Argentina, January 21, 2019. REUTERS/Agustin Marcarian/File Photo

By Sonali Paul and Jeslyn Lerh

SINGAPORE (Reuters) - Oil prices were broadly steady on Friday, lifted by supply concerns as attention turns to the next meeting between OPEC and its allies, though fears of recession capped gains.

U.S. West Texas Intermediate (WTI) crude futures for September delivery rose 67 cents, or 0.7%, to $97.09 a barrel by 0640 GMT, reversing losses from the previous session and on track for a nearly 3% rise for the week.

Brent crude futures for September settlement, due to expire on Friday, dipped 12 cents, or 0.1%, at $107.02 a barrel. The more active October contract climbed 48 cents, or 0.5%, to $102.31.

"It certainly feels like we are back in trade-off mode again, where sentiment is shifting between recessionary risks in H2 and a fundamentally undersupplied market," said Stephen Innes, managing partner at SPI Asset Management.

A key driver will be the next meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together called OPEC+, on Aug. 3.

Producers have now unwound the record 9.7 million barrels per day (bpd) supply cut they agreed in April 2020, when the COVID-19 pandemic slammed demand.

"Oil prices have little chance of (posting) deep losses on the back of a weak U.S. dollar and the ongoing supply crunch," said CMC Markets analyst Tina Teng.

OPEC+ sources said the group will consider keeping oil output unchanged for September, but two OPEC+ sources also told Reuters a modest increase would be discussed.

A decision not to raise output would disappoint the United States after U.S. President Joe Biden visited Saudi Arabia this month hoping to strike a deal on oil production.

A senior U.S. administration official said on Thursday the government was optimistic about the OPEC+ meeting, and said extra supply would help stabilise the market.

Analysts, however, said it would be difficult for OPEC+ to boost supply much given that many producers are struggling to meet their production quotas due to a lack of investment in oil fields.

"OPEC production is constrained, though supplies are stabilising in Libya and Ecuador. Under-investment in many member countries will keep production constrained," ANZ Research analysts said.