Oil prices edged higher on Wednesday, recovering about $1 a barrel after the previous session’s 6 percent drop, as traders reacted to a surprise fall in U.S. crude inventories and record Indian imports.
International Brent crude futures rose to $63.60 a barrel at 0516 GMT, up $1.07, or 1.7 percent. U.S. West Texas Intermediate futures climbed to $54.46 a barrel, up $1.03, or 1.9 percent.
The rebound followed a late-Tuesday American Petroleum Institute report 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 India’s crude imports, which hit almost 5 million barrels per day.
Even with the bounce, the market remained under pressure after the prior session’s broad selloff in global equities pushed crude down more than 6 percent. The International Energy Agency said the oil market was 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 on Wednesday that the renewed 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 has been pushing for output cuts of between 1 million and 1.4 million barrels per day to avoid a repeat of the 2014 glut, even as supply rises and demand expectations weaken. Ashley Kelty, 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 signals deepen ¶
Brent and WTI had already fallen 28 percent and 30 percent respectively since early October. The shape of the forward curve also shifted, moving from steep backwardation in October into contango for most of 2019, a pattern that suggests oversupply and makes storage more attractive.
Goldman said a recovery would require the Brent forward curve to return to backwardation after its sharp flattening. James Mick, energy portfolio manager at Tortoise, said part of the problem was “surging U.S. production.”
U.S. crude output has risen by almost a quarter this year to a record 11.7 million barrels per day, driven largely by shale production. That surge has helped lead the broader price slump in U.S. crude markets.
Photo: Oil pump jacks are seen next to a strawberry field in Oxnard, California, on February 24, 2015. REUTERS/Lucy Nicholson
Reporting by Henning Gloystein; Editing by Joseph Radford and Richard Pullin.
