Oil prices in Singapore recovered some of the previous session’s more than 6 percent drop after an unexpected decline in U.S. commercial crude inventories and record Indian crude imports gave the market brief support.
Brent crude futures were at $63.35 a barrel at 0401 GMT, up 82 cents, or 1.3 percent. U.S. West Texas Intermediate rose 78 cents, or 1.4 percent, to $54.21 a barrel.
The rebound followed an American Petroleum Institute report late on Tuesday showing U.S. commercial crude stocks fell by 1.5 million barrels to 439.2 million in the week to Nov. 16. Traders also pointed to Indian crude imports of almost 5 million barrels per day.
That recovery did not erase the broader weakness in the market. Crude had fallen more than 6 percent in the previous session as global stock markets sold off, and the International Energy Agency said oil markets were facing unprecedented uncertainty because of a difficult economic backdrop and political risk.
“The global economy is still going through a very difficult time and is very fragile,” IEA chief Fatih Birol said on Tuesday.
Goldman Sachs said the renewed price drop reflected “concerns over excess supply in 2019... (and) a broader cross-commodity and cross-asset sell-off as growth concerns continue to mount.”
OPEC was pushing for a supply cut of between 1 million and 1.4 million bpd to avoid a repeat of the 2014 glut. Ashley Kelty, an oil analyst at Cantor Fitzgerald Europe, said: “We would anticipate further weakness until the reaction from OPEC+ (Dec. 6) and the G20 summit is clearer (Nov. 30/Dec. 1).”
Oversupply fears deepen as the curve shifts ¶
Brent and WTI had already fallen 28 percent and 30 percent respectively since early October, and the forward curve had changed in a way that pointed to a looser market.
In October, the Brent forward curve was in steep backwardation, a structure that suggests prompt barrels are more valuable than later delivery and makes storage unattractive. By November, the curve had moved into contango for much of 2019, indicating traders expected more supply than demand and saw value in storing crude for later sale.
Goldman said rising output and weak demand growth pointed to “greater supply/spare capacity next year,” though it did not expect prices to return to the lows seen in early 2016, when crude slipped below $30 a barrel.
James Mick, energy portfolio manager at U.S. investment firm Tortoise, said “part of the supply issue has been surging U.S. production.” U.S. crude output had risen by almost a quarter in 2018 to a record 11.7 million bpd, largely because of shale growth.
The source image caption identified oil pump jacks in Oxnard, California, on February 24, 2015, underscoring the long-running nature of the U.S. shale expansion that was feeding the 2018 supply overhang.
Reporting by Henning Gloystein; Editing by Joseph Radford and Richard Pullin.
