Oil prices edged higher on Wednesday, 21 November 2018, after the previous session’s drop of more than 6 percent, helped by an unexpected fall in U.S. commercial crude inventories and record crude imports by India.
Brent crude futures were at $63.42 a barrel at 0157 GMT, up 89 cents, or 1.4 percent. U.S. West Texas Intermediate futures stood at $54.13 a barrel, up 70 cents, or 1.3 percent.
The American Petroleum Institute said on Tuesday that U.S. commercial crude stocks fell by 1.5 million barrels to 439.2 million barrels in the week to Nov. 16. Traders also pointed to India’s imports of almost 5 million barrels per day as another source of support.
Even with the rebound, the broader market remained weak. Crude had tumbled more than 6 percent in the prior session as global stock markets sold off, while the International Energy Agency warned that oil markets were facing unprecedented uncertainty because of a difficult economic backdrop and political risk.
IEA chief Fatih Birol told Reuters on Tuesday: “The global economy is still going through a very difficult time and is very fragile.”
Pressure on prices had been building for weeks. Brent and WTI had fallen by 28 percent and 30 percent respectively since early October, as investors worried about excess supply and slowing demand growth.
OPEC was pushing for a supply cut of between 1 million and 1.4 million bpd in an effort to avoid a repeat of the 2014 glut, when an oversupplied market helped trigger a price crash. The group’s concern was sharpened by surging U.S. output, which had climbed by almost a quarter in 2018 to a record 11.7 million bpd, largely because of shale production.
Market structure also shifted. In October, the Brent forward curve was in steep backwardation, a sign of a tight market and a setup that discouraged storage. Since then, it had moved into contango for most of 2019, indicating oversupply and making it more attractive to store oil for later sale.
ANZ said investors were increasingly doubtful that any OPEC-led reduction would be enough to clear the surplus. James Mick, energy portfolio manager at U.S. investment firm Tortoise, said the decline was being driven by “too much supply and a risk of slowing demand growth,” adding that part of the supply problem came from surging U.S. production.
The Reuters report was published on 21 November 2018. The accompanying image caption referenced an oil pump jack photograph taken in Oxnard, California, on 24 February 2015.
