Oil Prices Bounce Off of 2018 Lows
November 14 2018 - 9:52AM
Dow Jones News
By Christopher Alessi
Oil prices began to rebound Wednesday from Tuesday's plunge as
investors weigh concerns that global output could outstrip demand
against potential supply cuts from the Organization of the
Petroleum Exporting Countries and its allies.
Light, sweet crude for December delivery was recently 2.4%
higher at $57.04 a barrel on the New York Mercantile Exchange.
Brent crude was up 2.1% at $66.87 a barrel.
WTI had its steepest plummet in over three years on Tuesday,
closing down 7.1% at its lowest price this year, and marking a
record 12th day of declines, while Brent closed down 6.6%. Both
benchmarks have slid roughly 25% since reaching four-year highs at
the start of October, leaving them well into a bear market, which
is roughly defined as a 20% decline from a recent peak.
OPEC and its allies outside the cartel, led by Russia, signaled
Sunday they could decide in December to hold back output by around
1 million barrels a day, amid signs the market will be oversupplied
in 2019.
That prospect bolstered prices as the start of the week, before
President Trump sent out a tweet criticizing any cut by the Saudis
and OPEC, triggering a renewed selloff.
"OPEC's failure to respond to Trump's remarks yesterday
generated additional uncertainty," Commerzbank analysts said
Wednesday in a note. "Clearly market participants want to test
OPEC's pain threshold. The high trading volume suggests that
speculators have squared further long positions and/or built up
short positions."
The International Energy Agency warned Wednesday that global oil
supply was on pace to significantly outstrip demand, as Russia,
Saudi Arabia and the U.S. are pumping out crude at record
levels.
Ole Hansen, head of commodity strategy at Saxo Bank, said the
report had a silver lining, with the IEA reiterating its demand
growth forecast for this year and next, at 1.3 million barrels a
day and 1.4 million barrels a day, respectively.
That forecast contrasted with OPEC's monthly oil market report,
released Tuesday, which predicted a slowdown in global demand
growth by 40,000 barrels a day this year and 70,000 barrels a day
next year.
"Given the most recent price declines and the mounting consensus
on a more problematic fundamental situation for 2019, the onus will
be on OPEC to come up with some kind of constructive outcome next
month," analysts at consulting firm JBC Energy said in a note
Wednesday.
OPEC and its allies are set to gather in Vienna starting Dec.
6.
Investors and analysts are looking ahead to weekly U.S. oil
inventory data Thursday from the Energy Information Administration,
as well as data Friday from Baker Hughes on the number of rigs
drilling for oil in the U.S.
--Dan Molinski contributed to this article.
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
November 14, 2018 10:37 ET (15:37 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.