BEIJING/SINGAPORE – Oil prices clawed back some ground on Wednesday as global equity markets showed signs of stabilizing, but crude was still under pressure from worries about oversupply and a slowing global economy that had driven sharp losses in the last three sessions.
West Texas Intermediate futures (WTI) had climbed 7 cents, or 0.15 percent, to $46.31 per barrel by 0722 GMT, after plunging 7.3 percent the day before in a session when it touched its lowest since August 2017.
Global benchmark Brent crude futures rose 0.36 percent, or 20 cents, to $56.46 per barrel. They dropped 5.6 percent on Tuesday, at one point hitting a 14-month low.
Brent is down more than 30 percent from a recent peak of $86.74 per barrel on Oct. 3, while WTI has declined nearly 40 percent from a multi-year high of $76.9 per barrel recorded on Oct. 4.
“(WTI prices are holding on Wednesday as) traders look for some solace in U.S. equity markets as risk sentiment appears to be stabilizing,” said Stephen Innes, head of trading for Asia-Pacific at OANDA
“But we are far removed from any bullish flip in investor sentiment.”
The S&P 500 ended up slightly on Tuesday and the Dow Jones Industrial Average rose 0.35 percent as both indices ended losing streaks.
Further adding to the oversupply concerns, the American Petroleum Institute on Tuesday said U.S. crude stocks rose unexpectedly last week, while gasoline inventories increased.
If the build in crude stockpiles is confirmed by U.S. government data on Wednesday, it will be the first increase in three weeks.
Meanwhile, analysts said that upcoming output cuts led by the Organization of the Petroleum Exporting Countries (OPEC) had so far failed to stimulate the market as they were not due to kick in until next month.
Output from de facto OPEC leader Saudi Arabia as well as the United States and Russia – leading producers outside the group – has been at or near record highs.
The U.S. government said shale production is expected to climb to over 8 million barrels per day (bpd) for the first time by the end of December.
Russian oil output is at a record 11.42 million bpd so far this month, an industry source told Reuters.
However, there were some factors tightening supply, with Libya’s state oil company declaring force majeure at the country’s largest oilfield.
That came a week after the firm announced a contractual waiver on exports from the field following its seizure by protesters.
Elsewhere, a speech marking 40 years of market liberalization by Chinese President Xi Jinping offered no specific support measures for the second-largest economy, disappointing investors who were expecting fiscal policy loosening and a tax cut.
China’s Shanghai crude futures fell 5.8 percent to trade at 389.4 yuan ($56.53) per barrel on Wednesday, the lowest since their launch in March.
Oil market investors were also turning their attention to the outcome of a two-day meeting of the U.S. Federal Reserve that is due to end on Wednesday.
The Fed is expected to raise U.S. interest rates for the fourth time this year though the central bank may temper the outlook for further increases in 2019 due to concerns about the economy. – Reuters