Oil prices rose on Wednesday on perceptions that a price slide to 2017 lows prompted by economic worries had been overdone amid an OPEC-led effort to tighten supply. U.S. West Texas Intermediate crude futures was up $1.26, or 3 percent, at $43.79. WTI fell 6.7 percent to settle at its lowest level in a year and a half on Monday.
Crude has been caught up in wider financial market weakness as the U.S. government shutdown, higher U.S. interest rates and the U.S.-China trade dispute unnerved investors and exacerbated worries over global growth.
Brent crude oil futures, the global benchmark, was up 95 cents, or 1.9 percent, at $51.42 at 9:32 a.m. ET (1432 GMT). It earlier fell to $49.93, the lowest since July 2017, and posted a 6.2 percent slide in the previous session.
“I think there is a little bit of over-extension to the downside linked to global market fears,” said Olivier Jakob, analyst at Petromatrix. “It’s all about equities.”
“OPEC has shown it wants a higher prices and is working towards that goal.”
Still, the head of Russian oil company Rosneft, Igor Sechin, predicted an oil price of $50-$53 in 2019, a long way south of the four-year high of $86 for Brent crude reached earlier this year.
Sechin, an ally of Russian President Vladimir Putin and a critic of OPEC, said the price slump was mostly linked to the U.S. rate hike announced last week.
Wall Street opened higher, lending oil some support. Asian stocks retreated on Wednesday while markets in Britain, Germany and France remained closed for Christmas holidays.
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.
Concerned that a new glut could form, OPEC and its allies including Russia decided earlier this month to return to a policy of cutting production in 2019, unwinding a decision taken in June 018 to pump more oil.
The producers’ alliance, known as OPEC+, plans to lower output by 1.2 million barrels per day, of which OPEC’s share is 800,000 bpd, next year, and some ministers have even suggested taking further action.
Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said some buying interest had returned after firmer trading in U.S. equity futures.
But, he added, economic worries will continue to weigh unless OPEC reassures the market as to the viability of the supply cuts and “even imposes deeper ones as some members have suggested.”