London: Oil rose above $40 a barrel on Tuesday after a 10% slump on Monday but showed no sign of a return to last week’s bull run as global equities extended a fall on worries about the global economy and outweighed Opec’s strong compliance with supply curbs.
US crude was up 69 cents at $40.84 a barrel by 4:40pm, after tumbling $4.61 overnight, while London Brent crude rose $1.03 to $43.24 a barrel.
European shares fell on Tuesday, with a key index hitting a lifetime low as investors sold out of the banking sector and concerns about the health of the economy weighed on sentiment.
Opec oil supply fell in February for a sixth straight month as members enforced a deal to cut output and prop up oil prices, a Reuters survey showed on Monday, but analysts expect more cuts by the producer group when it meets in Vienna on 15 March.
“Given the recent weakness in oil prices...we suspect that OPEC cannot afford to do nothing, and will have to put another cut through,” Edward Meir of MF Global wrote in a note.
World equities plumbed multi-year lows on Monday and the dollar climbed to nearly three-year highs as a record quarterly loss for US insurer AIG fuelled fears over the financial sector and boosted the greenback’s safe-haven status.
The Dow Jones stock index fell below 7,000 for the first time since October 1997 after American International Group reported the biggest quarterly loss in US corporate history at $61.7 billion. Inventory figures on Tuesday and Wednesday will show the impact on demand from the world’s top energy consumer and February unemployment and non-farm payroll data on Friday will shed more light on the state of the US economy.
Mixed macro-economic data out of top energy-consumer the United States on Monday showed milder shrinkage in manufacturing and a slight bounce in consumer spending, but the improvement was likely a blip amid a rapidly deteriorating economy.