Oil prices fell on Thursday, erasing early gains and heading down, a day after a drop sparked by a US interest rate rise, albeit tight supplies restricted losses.

Brent crude prices were down 45 cents, or 0.4 percent, to $118.06 a barrel by 0906 GMT, while WTI crude futures were down 44 cents to $114.87, also down 0.4 percent. Both contracts stayed inside the range of the previous session. Overnight, prices fell more than 2% as the Federal Reserve hiked its main interest rate by 0.75 percent, the largest increase since 1994.

Oil prices eased after the dollar index fell from a 20-year high, alleviating downward pressure. A higher dollar makes oil bought in US dollars more costly for holders of foreign currencies, reducing demand. As Western sanctions restricted access to Russian oil, investors remained focused on constrained supplies.

Libyan oil output has dropped to 100,000-150,000 barrels per day (BPD), according to a spokesman for the oil ministry, down from 1.2 million BPD last year. This is putting a strain on already tight supplies, while the International Energy Agency predicts that demand will climb even more in 2023, rising by more than 2% to a new high of 101.6 million BPD.

The pricing forecast is also supported by expectations that China’s oil demand would rise when COVID-19 limitations are eased. The Energy Information Administration said that crude and distillate stockpiles increased in the week ending June 10, while gasoline inventories decreased. Despite this, Bernstein assessed global inventory levels to be 48 days of demand cover, which is less than the long-term average of 55 days.