Oil prices jump 4%, but demand concerns still weigh
Oil futures were buoyed by some gains in US stocks, with the Nasdaq Composite turning positive after earlier losses.Crude futures have recently tracked stocks on Wall Street
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London: Oil prices rose 4 % in choppy trading on Wednesday, but concerns remained about rising crude production and weakening global economic growth which could hurt demand for oil.
Brent crude futures rose $2.38 to $56.18 a barrel, a 4.4 % gain, by 11:27 a.m. EST (1627 GMT) after earlier falling as low as $52.51. U.S. West Texas Intermediate (WTI) crude futures rose $2.09 to $47.50 a barrel, a 4.6 % gain, after sinking to $44.35.
“Given the high levels of price volatility we’ve witnessed over the last month, a $2 daily move isn’t really anything other than signs we continue to have price volatility," said Gene McGillian, vice president of market research for Tradition Energy in Stamford, Connecticut.
Oil futures were buoyed by some gains in US stocks, with the Nasdaq Composite turning positive after earlier losses. [.N] Crude futures have recently tracked stocks on Wall Street.
However, disappointing manufacturing data from China earlier added to ongoing concerns about a slowing global economy and increased output out of countries like Russia..
China’s factory activity contracted for the first time in over two years in December, highlighting the challenges facing Beijing as it seeks to end a bruising trade war with Washington.
“The manufacturing survey data out of China this week is particularly negative for crude oil, as it goes to the heart of the key demand center for the market," said John Kilduff, a partner at Again Capital Management in New York.
Worries about an economic slowdown and excess supply dragged oil prices from multi-year highs reached in October 2018. Crude futures ended 2018 down for the first year since 2015.
Russian production hit a post-Soviet record in 2018, figures showed on Wednesday. Other data showed US output reached a record in October and Iraq boosted oil exports in December.
Surging shale output has helped make the United States the world’s biggest oil producer, ahead of Saudi Arabia and Russia. Oil production has been at or near record highs in all three countries.
Signs of rising production illustrate the challenge facing the Organization of the Petroleum Exporting Countries and its allies, including Russia, which are seeking to prop up the market with a supply cut of 1.2 million barrels per day.
However, the energy minister for the United Arab Emirates, an OPEC member, said on Tuesday he remained optimistic about achieving a market balance in the first quarter.
Earlier,Oil prices fell towards $53 a barrel on Wednesday, under pressure from rising output in major Opec and non-Opec producers and concerns about an economic slowdown that could weaken demand. Russian production hit a post-Soviet record in 2018, figures showed on Wednesday. Other data showed US output reached a record in October and Iraq boosted oil exports in December.
Brent crude was 60 cents lower at $53.20 a barrel at 1422 GMT. On 26 December, it hit $49.93, the lowest since July 2017. US crude slipped 73 cents to $44.68.
“The omens are far from encouraging," said Stephen Brennock of oil broker PVM, citing rising non-Opec supply and the likelihood of further increases in oil inventories.
“The current bearish bias will therefore continue in the near term and it stands to reason that oil will struggle to break out from its current trough," he said.
However, Nitesh Shah, director of research at WisdomTree, saw the prospect of a rebound for Brent because of an Opec-led supply cut that starts this month and moderating US supply growth.
“We believe we will see an upward correction," he said. “Recent weakness in prices should slow the growth of US shale production."
Oil prices fell in 2018 for the first year since 2015 after buyers fled the market in the fourth quarter over growing worries about excess supply and the economic slowdown.
Surging shale output has helped make the United States the world’s biggest oil producer, ahead of Saudi Arabia and Russia. Oil production has been at or near record highs in all three countries.
US President Donald Trump celebrated the low prices. “Do you think it’s just luck that gas prices are so low, and falling? Low gas prices are like another Tax Cut!" he wrote on his official Twitter account on Tuesday.
Adding to concern about a slowing global economy, a series of purchasing managers’ indexes for December mostly showed declines or slowing manufacturing activity across Asia, the main growth region for oil demand.
The signs of rising production illustrate the challenge facing the Organization of the Petroleum Exporting Countries (Opec) and its allies, including Russia, which are seeking to prop up the market with a supply cut of 1.2 million barrels per day.
However, the energy minister for the United Arab Emirates, an Opec member, said on Tuesday he remained optimistic about achieving a market balance in the first quarter.
Reuters’s Henning Gloystein contributed to this story.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.
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