Oil recovers some losses after 6-percent plunge, but market on edge

A couple of months are too long a period in the crude world. Things change rapidly. — File

Yet the bounce did little to reverse overall market weakness, which saw crude tumble by more than 6%the previous session amid a selloff in global stock markets.

Crude oil futures for January ended down $3.77, or 6.6%, at $53.43 a barrel, the lowest settlement price in about 13 months. The contract fell as much as 7.7 per cent during the session to touch US$52.77 a barrel, the lowest since October 2017.

Fund managers cut their bullish exposure to crude futures and options to the lowest since around mid-2017 this month. The global benchmark fell as much as 7.6 per cent to $61.71, the lowest since December 2017.

Tuesday's drop extended a slide that has been largely unimpeded since early October. WTI prices are about 30 percent lower from near four-year peaks hit in early October, weighed down by surging supply and the selloff in risk assets worldwide.

Unless these scenarios change dramatically today, WTI and Brent crude oil are likely to remain rangebound amid reports that OPEC is planning to announce the production cuts when it meets in Vienna on December.

"For the time being it's more about risk", said Jim Ritterbusch, president of Ritterbusch and Associates.

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'.

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Amid the uncertainty, financial traders have become wary of oil markets, seeing further downside risk to prices from the growth in United States shale production as well as the deteriorating economic outlook. USA president Donald Trump added pressure on oil when he said that Saudi Arabia has been "responsive" to requests to keep prices low, calling into question OPEC's resolve to trim output.

"OPEC continues to discuss a reduction of oil production to halt falling prices, but Russian Federation didn't seem too supports the idea that increases the responsibility of Saudi Arabia for any coordinated action", said analyst commodity sector Schneider Electric Robbie Fraser.

A report from the industry-funded American Petroleum Institute offered a bullish note for oil investors, finding that United States crude stockpiles fell 1.55 million barrels last week, according to people familiar with the data.

Saudi Arabia's oil production surged to a record near 11 million barrels a day earlier this month as the kingdom received stronger-than-usual demand from clients, according to industry executives who track Saudi output.

Concerned about an emerging production overhang similar to the one that led to a price slump in 2014, the Organization of the Petroleum Exporting Countries (OPEC) is pushing for a supply cut of 1 million to 1.4 million bpd.

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.

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