Singapore: Oil rebounded by more than $1 a barrel to under $44 in light bargain hunting on Wednesday, after slumping 4% overnight on the back of lowered forecasts for US energy demand and fears of a deepening global recession.
The market is looking ahead to producer cartel Opec’s 17 December meeting, which is expected to agree more output cuts to boost prices, and the release of the US energy department’s weekly inventory report later on Wednesday, which is likely to show rising crude stocks.
US crude for January delivery was up $1.26 at $43.33 a barrel by 8:05am (IST), off a session high of $43.40, after falling $1.64, or 3.75%, to settle at $42.07 a barrel on Tuesday. London Brent crude was up 98 cents at $42.51.
“After last night’s fall, we could be seeing some bargain-hunting, but the volumes are not large. Overall, there are no bullish factors to push up prices right now,” said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.
US stocks sank on Tuesday as negative retail sales data, tepid home sales figures and profit warnings from firms sent investors scrambling for the exits, ending a two-day rally that had raised hopes the stock market may have hit a cyclical bottom.
Reinforcing the gloomy economic backdrop, Japan sank further into recession in the third quarter, while fresh indicators from Britain and France underscored the deepening economic contraction in Europe, and Canada declared itself in recession on Tuesday.
In its monthly energy outlook, the US Energy Information Administration said it expected global oil demand to fall 50,000 barrels per day in 2008 and 450,000 bpd in 2009 - marking the first drop in world oil demand year-to-year since 1983.
The lower forecast came as the EIA revised its 2009 world GDP growth estimate down to 0.5% from 1.8% last month.
The US Energy Information Administration’s (EIA) weekly inventory data due later on Wednesday will show that crude stocks rose 1.0 million barrels, according to an expanded poll of 13 analysts by Reuters.
Producer grouping Opec, which has faced a slide of more than $100 a barrel in oil prices since July, has already agreed to cut about 2 million bpd of production to support prices, and members are leaning toward more supply cuts at the Algeria meeting.
OPEC kingpin Saudi Arabia, which has cited $75 a barrel as a “fair price” for oil, will make bigger supply cuts to some of its Asian and European customers next month, as it redoubles efforts to arrest the steep slide in prices.