Oil surges 8% after steep slide; growth fears still weigh

A pump jack on a lease owned by Parsley Energy operates in the Permian Basin near Midland

Continued growth in USA crude production, notably by shale-oil producers, also has contributed to worries about a growing glut worldwide.

While economic worries have weighed, the outlook is not as weak as in 2016 when a supply glut built up, because OPEC this time is trying to prop up the market, Jakob said.

The decline in prices prompted United States shale producers to cut back on their drilling plans for next year.

But if oil companies curb activity and the economy doesn't perform as badly as the stock market suggests, then Flynn warns that oil prices could spike in 2019.

Still, the macroeconomic picture and its impact on oil demand continue to pressure prices. The chance of an extraordinary meeting by OPEC and its allies is "sending a signal to the market that they will do whatever it takes". Yet, crude's descent has deepened as investors doubt the reductions will be sufficient to dent supply levels, with USA crude output still above 11 million barrels a day on a weekly basis.

The US-China trade dispute and the prospect of a rapid rise in US interest rates have brought global stocks down from this year's record highs and ignited concern that oil demand will be insufficient to soak up any excess supply.

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"I think there is a smidgen of over-expansion to the drawback connected to worldwide market fears", said Olivier Jakob, examiner at Petromatrix.

Brent fell 11 per cent last week and hit its lowest level since September 2017, while USA futures slid to their lowest level since July 2017, bringing the decline in the two contracts to more than 35 per cent for the quarter.

Efforts by Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, to limit output beginning early next year by 322,000 barrels a day — more than a previously announced cut of 250,000 barrels a day for six months starting in January, according to the Wall Street Journal — had not adequately quelled concerns over supply to end 2018.

"There are several bearish factors in oil markets, and the situation won't improve anytime soon".

February West Texas Intermediate CLG9, +0.58% gained $4.69, or 8.6%, to $46.22 a barrel on the New York Mercantile Exchange. The contract slumped $3.06 to $42.53 on Monday. It prior tumbled to $49.93, the least since July 2017, and posted a 6.2 percent slide in the past session.

Global benchmark Brent was trading down 6.2 percent, at $50.47 a barrel as of 9:12am GMT.

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