Oil Prices Fall after 8 percent Rebound

Oil prices on Thursday retreated from the previous session’s 8 percent bounce, as concerns over a supply glut and weakening global economy kept gains in check despite receiving support from the recent rally in stocks.

International benchmark Brent crude oil futures for March delivery slipped 2.5 percent to $53.88 per barrel, having dropped 3.1 percent to a low of $52.80 earlier in the session.

February contract US West Texas Intermediate (WTI) crude futures fell to $44.92 a barrel and were last trading down 2.4 percent to $45.49.

Prices hit multi-year highs in early October, but both benchmarks have shed over a third of their value since the start that month and are on track to lose more than 20 percent this year.

Energy market analyst Johannes Gross said the fear of a bear market remains in place.

Oversupply Caps Gains in Oil Prices

Weakness in prices came as the supply glut has combined with faltering investor sentiment in other classes, resulting in a bear market for oil.

Three months ago, the global oil market appeared like it would have less supply than expected through the northern hemisphere winter as US sanctions take out huge volumes of Iranian crude.

However, other oil exporters have more than offset any shortfall, filling global inventories and lowering prices.

Providing support on oil prices was the rally in stock markets. Equities recovered on Wednesday after US President Donald Trump’s administration made an effort to strengthen investor confidence.

The Organization of the Petroleum Exporting Countries (OPEC) along with other producers including Russia had agreed earlier this month to cut output by 1.2 million barrels per day (bpd), or over 1 percent of global consumption.

The reductions, however, will not take effect until January and oil production has been at or close to record highs in the US, Russia, and Saudi Arabia, with the US producing 11.6 million bpd. That is higher than both Saudi Arabia and Russia.

Even with US sanctions limiting Iran’s oil sales, Tehran has said its private exporters have no problems selling its oil.

Market analyst Margaret Yang stated that markets need more concrete evidence on improving fundamental metrics and to bring the supply-demand relationship back to balance before oil prices can reach a real bottom.

Data on the US oil market is set to be revealed in the next couple of days with reports from the American Petroleum Institute (API) and the US Energy Information Administration (EIA) due for release on Thursday and Friday respectively.

Survey conducted by a UK media firm showed US crude inventories fell 2.7 million barrels in the week to December 21.

Meanwhile, gold prices also rose on Thursday as the record rally in stocks showed signs of calming down and as the political tumult shore up demand for the safe-haven metal.

Gold futures gained 0.6 percent to $1,278.40 per ounce, while silver futures advanced 1.1 percent to $15.270 per ounce and palladium futures rose 0.6 percent to $1,194.90 per ounce.

So far this month, gold has added 4 percent as investors backed away from stocks and turned to the safe haven asset.

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