Oil prices resume fall, shed last session’s gains

BEIJING/SINGAPORE: Oil prices fell on Thursday to erase most of their gains from the day before, resuming declines seen earlier in the week amid worries about oversupply and the outlook for the global economy.

The front-month US crude contract CLc1 had dropped $1, or 2.08 per cent, to $47.17 per barrel by 07:42 GMT, offseting gains of 96 cents chalked up on Wednesday.

International benchmark Brent crude LCOc1 futures were down $1, or 1.75 per cent, at $56.24 per barrel, after climbing almost 2 per cent the session before.

“Wednesday’s recovery was short-covering. Investors quickly moved their attention to deteriorating fundamentals in the oil markets including more signs of slowing economic growth next year, record production and the lack of confidence with OPEC’s pledge to curb production,” said Xi Jiarui, chief oil analyst at consultancy JLC.

The Organization of the Petroleum Exporting Countries and other oil producers including Russia agreed this month to curb output by 1.2 million barrels per day (bpd) in an attempt to drain tanks and boost prices.

Oil prices are down more than 30 per cent from peaks seen in October. But the cuts will not happen until next month and production has been at or near record highs in the United States, Russia and Saudi Arabia.

Saudi Arabia’s energy minister, Khalid al-Falih, said he expected global oil stocks to fall by the end of the first quarter, but added that the market remained vulnerable to political and economic factors as well as speculation. Technical analysis showed US oil may retest support at $45.94 per barrel, a break below which could cause a loss to $44.43, Reuters market analyst Wang Tao wrote on Thursday.

Volatility in crude prices this week has driven investors to close their positions and is draining liquidity from the market, Xi said. Total market open interest in US crude contracts had fallen to 2.063 million contracts as of Thursday, up from a record of 2.71 million in May.

“It has been a tumultuous week in oil markets and traders may opt to shut it down after the last big risk event of the year with year-end position-squaring likely to kick-in today,” said Stephen Innes, head of trading for Asia-Pacific at OANDA.

— Reuters