Singapore: Oil was steady below $44 a barrel on Thursday, after rising more than 3% overnight on signs that top oil exporter Saudi Arabia has slashed January supplies ahead of next week’s Opec meeting.
The producer cartel is expected to agree more output cuts to keep oil away from four-year lows hit last week, as it battles falling demand likely to be underlined in a monthly report from the International Energy Agency due later on Thursday.
Indicators on the health of the US economy later, such as weekly jobless claims due later in the day, could make grim reading for Wall Street and imply a further weakening in demand from the world’s top oil consumer.
US crude for January delivery was up 21 cents at $43.73 a barrel by 0220 GMT, after surging $1.45 to settle at $43.52 a barrel on Wednesday.
London Brent crude was up 20 cents at $42.60.
“The huge price swings overnight - you rarely see moves of this magnitude - prove how volatile the whole energy complex is at the moment,” said Peter McGuire, managing director of Commodity Warrants Australia.
Saudi Arabia told some of its biggest customers it was reducing supplies substantially next month in a move that could bring the kingdom’s output below its implied Opec target of 8.47 million barrels per day.
The cuts imply that the Opec kingpin expects the cartel, which has already agreed to cut about 2 million bpd of production since September, to agree a further reduction in supplies at its 17 December meeting.
Russia, which will attend the Opec meeting as an observer amid calls from some members for Moscow to join in output curbs, said on Wednesday it would present its own proposal at the Opec meeting.
“These are linked to measures to protect our national interests and to provide, in our view, fairer and more stable rules on the oil market,” Energy Minister Sergei Shmatko said.
A US Energy Information Administration report this week forecasting the first contraction in world oil demand year-to-year since 1983 added to expectations that Opec would deepen cuts as it reacts to the more than $100 a barrel fall in prices since July.
Rising stockpiles in the world’s largest energy consumer also reinforced the dismal outlook, with the US Energy Information Administration saying it sees US gasoline demand falling faster this year and next than in any two-year period since 1979-1980.
The US Labour Department will release first-time claims for jobless benefits for the week ended 6 December later on Thursday. Economists in a Reuters poll forecast a total of 525,000 new filings compared with 509,000 in the prior week.
Any signs of a deepening recession in the world’s largest economy could send Wall Street into a tailspin.