By Ken Afor
On Thursday, oil prices recovered some of their losses from the day before, when they nearly hit a six-month low. Investors, though, are still worried about the weak demand and economic issues in the US and China.
At 04:09 GMT, Brent crude futures increased by 0.5%, amounting to 38 cents, to $74.68 per barrel. Simultaneously, U.S. West Texas Intermediate crude futures rose 0.6%, amounting to 42 cents, to $69.80 per barrel.
“Oil markets may have been oversold,” which could mean the recovery is a “short-term rebound,” said Tina Teng, a markets analyst with CMC Markets, in a note.
Analysts at ANZ commented in a note that the market was spooked by the data showing that U.S. output remained at near-record heights, even though inventories had decreased, in the previous session.
ANZ analysts believe that the bearishness partly resulted from higher product fuel inventories.
The Energy Information Administration (EIA) reported on Wednesday that the amount of gasoline in storage increased significantly more than projected, climbing 5.4 million barrels to a total of 223.6 million barrels in the week. This exceeded analysts’ forecasts of a 1 million-barrel rise.
After twelve months of trading Brent contracts in a backward structure, they recently transitioned to trading in contango, with near-term delivery being less expensive than contracts for six months ahead. Similarly, WTI contract trading also changed to a contango structure for the 6-month period.
There is less anxiety about the present supply circumstances, which is evidenced by the market moving back into contango, and this inspires traders to store barrels.
Since OPEC+ declared a combined reduction of 2.2 million barrels a day in voluntary production, oil prices have gone down by around 10%.
“Oil markets seem to completely sideline producer’s cartel maneuvers aimed at keeping oil prices elevated,” said Priyanka Sachdeva, analyst from Phillip Nova, in a note.
According to a survey conducted by Reuters, OPEC oil output was discovered to have declined in November, which was the first decrease since July, due to cuts in shipment from Nigeria and Iraq, in addition to OPEC+ alliance’s ongoing supportive steps for the market taken by Saudi Arabia and other countries.
On Wednesday, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman came together to talk about additional oil rate collaboration as representatives of OPEC+. This meeting could increase the market’s faith in the effectiveness of output reductions.
Kuwait and Algeria further verified their aid and dedication to the voluntary reductions.
“The sign of easing inflation is (also) feeding into fears of a global economic slowdown and in turn dented demand for fuel globally,” Sachdeva said.
Data from Chinese customs revealed a 9% decrease in crude imports in November compared to the same month of the preceding year, largely due to abundant stockpiles, economic uncertainty and dwindling orders from independent refineries.
In November, while overall imports decreased from the previous month, China saw their exports increase for the first time in six months, signaling that the manufacturing industry may be starting to experience an upsurge in international exchange.
Moody’s triggered warnings of downgrade for Hong Kong, Macau, as well as a large selection of China’s state-backed companies and banks on Wednesday, only one day after it lowered the nation’s sovereign credit rating.
