Investing.com – Volatility is returning to oil, with daily swings of 2% to 3% likely, as traders and investors get caught up in countervailing themes such as production cuts and other supply disruptions versus fear of slowing growth and energy demand.
After settling up 2% on Friday on output cuts announced by OPEC and its allies, then slumping 3% on Monday on renewed anxieties over the U.S.-China trade war and Brexit, oil was up again on Tuesday, egged on by an early Wall Street rally and an unexpected outage in Libyan supply.
“Overall, flows remain limited in our view as discretionary trading is at a minimum as we approach year end as the market is unsure on whether to pay attention to the concept of less oil from OPEC and Canada, or pay attention to sagging demand possibilities due to what the market perceives as a global slowdown,” said Scott Shelton, broker and analyst for ICAP (LON:) in Durham, N.C.
U.S. crude was up 48 cents, or 1%, at $51.48 per barrel by 12:31 PM ET (17:31 GMT), after rising nearly 3% earlier in the session. With just three weeks to the end of 2018, WTI remains down 15% on the year and about 33% lower from four-year highs of nearly $77 per barrel hit in early October.
, the global benchmark for crude, rose by 19 cents, or 0.3%, to $60.16 per barrel. Brent is down almost 10% on the year and 30% lower from four-year highs of nearly $87 per barrel hit two months ago.
Stocks on Wall Street rose on signs of progress between China and the United States to resolve their trade dispute, with the positive sentiment feeding across risk assets after President Donald Trump tweeted about “very productive” talks and the promise of “important announcements” to come.
On the Libyan front, officials cited a production loss of 315,000 barrels per day (bpd) from the El Sharara oilfield, which was seized at the weekend by a local militia group. Separately, Libya’s National Oil Company (NOC) reported an additional loss of 73,000 bpd at another oilfield, El Feel.
Offsetting that positive sentiment were remarks by Russian Energy Minister Alexander Novak that Moscow would only be able to reduce 50,000 to 60,000 bpd in January from its pledge at last week’s OPEC meeting to cut some 228,000 bpd over the next six months.
Oil prices initially soared last Friday after Russia and other non-OPEC oil producers offered to cut a cumulative 400,000 bpd on top of the 800,000 bpd that Saudi Arabia and the rest of OPEC planned to take off the market through June. But the rally faded by Monday on the notion that the cuts did not account for the tide of U.S. supply that could come in the next six months if prices recovered.
The United States is already the world’s largest oil producer, churning out 11.7 million bpd, according to latest data. U.S. supplies rose by about 2 million bpd over the last year as crude prices jumped about 30% on an earlier round of supply cuts engineered by the Saudis and Russians.
The U.S. Energy Information Administration, in its closely-watched Short-Term Energy Outlook released each quarter, said on Tuesday that it expected domestic crude production to average 12.1 million bpd in 2019, about 400,000 bpd higher than now.
In terms of pricing, it forecast WTI to average at around $54 per barrel next year and Brent at $61.
The EIA will publish its weekly supply-demand oil on Wednesday, where it expected to announce a drawdown of nearly 3 million barrels for last week, analysts said. U.S. crude shipments have been on a tear this year, with the country become a net exporter of oil last week for the first time in 75 years.
Source: Investing.com
