Oil withstands broader market drop on tight supply fundamentals

Oil futures shrugged off a broader market selloff, sustained by a growing belief that even an economic slowdown would fail to alleviate an ongoing supply crunch.

West Texas Intermediate futures rose to near US$121, erasing over US$3 of losses during the session. A growing chorus of market watchers believe that inventories are so fundamentally stretched even a recession wouldn’t cut demand enough to restore balance.  

Supplies are tighter than during other recessionary periods, said S&P Global Inc. Vice Chairman Daniel Yergin. “The supply situation is so razor thin,” he said in an interview on Bloomberg Television.