(Bloomberg) -- Oil fluctuated after a two-day rally as investors weighed the prospect of tightening supply against lingering slowdown concerns.
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West Texas Intermediate futures traded near $82 a barrel after rising 7% over the previous two sessions, including the biggest daily gain since mid-July. An escalating energy conflict with Russia and shrinking US stockpiles raised the possibility of a supply squeeze, putting oil on track for a weekly gain.
Despite the near-term bullishness, futures are still set for the first quarterly decline in more than two years as fears of a potential recession hang over the market. The dollar has spiked this month and is trading near a record, making commodities priced in the US currency less attractive to investors.
The European Union announced a new round of sanctions against Russia that would ban European companies from shipping the OPEC+ producer's oil to third countries above an internationally set price cap. Tension has escalated after natural gas pipelines were damaged in suspected sabotage.
US crude stockpiles unexpectedly declined last week, while gasoline supplies also fell, according to data from the Energy Information Administration on Wednesday. Inventories at the storage hub at Cushing, Oklahoma, rose.
"Crude prices remain in a precarious and volatile rebalancing phase," said Vandana Hari, founder of Vanda Insights in Singapore. "The continued lack of liquidity will exacerbate the price swings."
There's growing calls for the Organization of Petroleum Exporting Countries and its allies to slash production at its meeting next week to stem the decline in oil prices. The chorus of industry voices include UBS Group AG, JPMorgan Chase & Co. and RBC Capital Markets LLC, with industry consultant FGE predicting the market could dip into contango without intervention.
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