Published: Wed, November 21, 2018
Money | By Hannah Jacobs

Oil prices rise after 6% plunge, but market on edge

Oil prices rise after 6% plunge, but market on edge

The contract fell as much as 7.7 percent earlier in the session to $52.77 a barrel, the lowest since October 2017. The global benchmark fell as much as 7.6 percent to $61.71, the lowest level since December 2017.

Brent for January settlement gained 1.6 percent to $63.50 a barrel on the London-based ICE Futures Europe exchange after closing at $62.53 on Tuesday, the lowest since December.

West Texas Intermediate for January delivery rose as much as $1.29 to $54.72 a barrel on the New York Mercantile Exchange, and was at $54.29 at 11 London.

Oil's slide has been largely unimpeded since early October when WTI prices were near four-year peaks.

Since hitting a four-year high in early October, crude prices have now crashed nearly 30 per cent.

Brent crude has lost 26 percent in the same period.

The S&P 500 index on Tuesday hit a three-week low as weak results and forecasts from big retailers fanned worries about holiday season sales, while tech stocks slid further on concerns about iPhone sales.

Global stock markets have suffered a shakeout in the past two months, pressured by worries of a peak in corporate earnings growth, rising borrowing costs, slowing global economic momentum and worldwide trade tensions.

Oil prices are around a quarter below their recent peaks in early October, weighed down by surging supply, especially from the United States, as well as a slowdown in global trade.

Trump said he won't let the murder of journalist Jamal Khashoggi jeopardize us relations with the Saudis as oil prices may "go through the roof" if the partnership between the two nations breaks.

Fiona Cincotta, senior market analyst at City Index, said yesterday: 'Fears of slowing global growth are fuelling concerns over global demand, just at a time when Saudi Arabia, Russia and the USA continue to ramp up production'.

"I never really understood the premium behind some kind of friction between USA and Saudi Arabia from a policy standpoint".

Wednesday's gains came after a report by the American Petroleum Institute on Tuesday that USA commercial crude oil inventories had fallen unexpectedly by 1.5 million barrels, to 439.2 million barrels, in the week to Nov 16.

Meanwhile, the API was said to show nationwide crude inventories have slipped for the first time since mid-September ahead of government data due Wednesday.

Portfolio managers have sold the equivalent of 553 million barrels of crude and fuels in the last seven weeks, the largest reduction over a comparable period since at least 2013.

USA crude production C-OUT-T-EIA has soared nearly 25 percent this year, to a record 11.7 million barrels per day (bpd).

With output surging and the demand outlook deteriorating, the Organization of the Petroleum Exporting Countries (OPEC) is pushing for a supply cut of between 1 million and 1.4 million bpd to prevent a repeat of the 2014 glut.

Russia's energy minister Alexaner Novak has reportedly remarked that the oil market alliance will monitor supply and demand in the coming weeks before deciding on production levels.

"The name of the game in the oil market is volatility", International Energy Agency Executive Director Fatih Birol said at a conference in Oslo.

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