Oil prices claw back losses after ‘Black Friday’ plunge

SINGAPORE: Oil prices on Monday clawed back some losses from a nearly 8 per cent plunge the previous session, but Brent failed to hold above $60 per barrel amid generally weak financial markets.
Front-month Brent crude oil futures had risen by 96 cents, or 1.6 per cent, to $59.76 per barrel by 0745 GMT.
US West Texas Intermediate (WTI) crude futures were up 62 cents, or 1.2 per cent, at $51.04 per barrel.
The gains partly made up for Friday’s selloff, which traders have already dubbed ‘Black Friday’.
Reacting to Friday’s falls in Brent and WTI, China’s Shanghai crude futures on Monday fell by 5 per cent, hitting their daily downside-limit.
Judging by exchange data, traders are preparing for more price falls.
Managed short positions in front-month WTI crude futures, which would profit from further price declines, have surged from record lows in July to the highest number of short positions since October 2017.
What’s more, the number of puts — which give a trader the option though not obligation to sell a financial instrument at a certain price — in February Brent crude oil futures at $55 and $50 per barrel has surged to record levels since October.
The downward pressure comes from surging supply and a slowdown in demand growth which is expected to result in an oil supply overhang by next year.
“2019 will be a choppy year for the oil market as questions surrounding the prospect of a slowing global economy and a supply surplus are expected to increase,” analysts at Fitch Solutions said on Monday.
Fitch said that even an expected supply cut led by the oil cartel Organization of the Petroleum Exporting Countries (Opec) following an official meeting on December 6 “may not be enough to counteract the bearish forces”. — Reuters