Crude oil prices rebounded Thursday after the previous session’s sharp losses, as worries over tight global supplies offset the hit to risk sentiment caused by the downgrade of the U.S. credit rating.

By 09:10 ET (13.10 GMT), the U.S. crude futures traded 1.1% higher at $80.34 a barrel, while the Brent contract climbed 0.8% to $83.89.

Both benchmarks closed 2% lower on Wednesday after ratings agency Fitch cut the U.S.’s top-level AAA credit rating, citing the country’s high and growing government debt burden.

Crude markets have had a good run of late, with both benchmarks around 10% higher over the course of the last month, and this hit to sentiment prompted a pullback.

U.S. inventories illustrate tight supplies
However, sentiment stabilized after data from the Energy Information Administration recorded the largest drop in stocks according to records dating back to 1982.

“The weekly petroleum status report … was constructive for the oil market and shows that US commercial crude oil inventories dropped by a record 17MMbbls over the last week to 439.8MMbbls, the lowest since January and around 1% below the five-year average for this time of the year,” analysts at ING said, in a note.

This hefty drop illustrated the tight nature of global supply, which has been exacerbated by steep production cuts by major suppliers this year.

OPEC meeting awaited, extended supply cuts in focus
Focus is now on an upcoming meeting of the Organization of Petroleum Exporting Countries on Friday. Saudi Arabia, the de facto leader of the cartel, is expected to extend a 1 million barrel per day supply cut into September.

Production cuts by Saudi Arabia and Russia were the biggest boost to oil prices, with global supplies set to tighten substantially in the remainder of the year. The move was done in order to offset an expected decline in oil demand.

U.S. hails success of Russian price cap
In other news, the U.S. stated Thursday that the $60 per barrel price cap on Russian oil is hitting Moscow’s revenues even with the recent upturn in prices.

“Our approach has struck at the heart of the Kremlin’s most important cash cow. Before the war, oil revenues constituted about a third of the total Russian budget, but in 2023 that number has fallen to just 25%,” acting Assistant Secretary for Economic Policy Eric Van Nostrand said in the prepared remarks.