Oil slumped again in New York, just after recovering from a pre-Christmas plunge, amid ongoing concern about the global economy.
West Texas Intermediate futures retreated 1.8% after surging 8.7% on Wednesday. A rebound in equities also struggled to sustain momentum. There was turbulent trading in crude amid low holiday volumes, with prices slumping to an 18-month low on December 24 before posting their biggest rally in two years on December 26.
Oil is on track for about a 25% decline this year on fears that the ongoing trade dispute between the US and China will tip the global economy into recession, crimping fuel demand just as a new wave of American shale oil hits the market. But the losses are being limited by the prospect of production cuts by OPEC and its allies.
“It remains difficult to hold strong views on markets when so many participants are on holiday and equity markets are so volatile,” said Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland.
WTI for February delivery fell 83 cents to $45.39 a barrel on the New York Mercantile Exchange at 10:44 AM in London. The contract advanced $3.69 on Wednesday and tumbled $3.06 on December 24. Total volume traded was about 11 % above the 100-day average.
Brent for February settlement dropped $1.05 to $53.42 a barrel on London’s ICE Futures Europe exchange, after rising $4 on Wednesday. The global benchmark crude traded at a $7.99 premium to WTI.
Oil jumped on Wednesday as all three major US stock indexes gained at least 4%, a feat last achieved in 2011. President Donald Trump had said an equity rout that pulled the S&P 500 Index down about 20% from a record offered a “tremendous opportunity to buy.” Additionally, a White House official assured investors that Federal Reserve Chairman Jerome Powell won’t be fired, an action Bloomberg News reported that Trump had discussed.
“The uncontrolled tweeting from the White House and its top officials has made a roller-coaster out of the holiday period,” said Petromatrix’s Jakob.
There are some signs the US and China may be making progress to resolve their trade conflict. A delegation led by Deputy US Trade Representative Jeffrey Gerrish is said to plan a visit to China in early January for the first face-to-face discussion since the two countries agreed to a truce. That follows China’s announcement of another round of tariff cuts earlier this week.
“Hopes of US-China trade progress impacted equity and crude markets” even though it’s a small step in the negotiation process, said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp. “As trading volumes are thin, crude prices could continue to be volatile and react to every little thing through early January.”
Meanwhile, US crude inventories probably fell 3mn barrels last week, according to a Bloomberg survey of analysts. If Energy Information Administration data due Friday shows a similar move, it will be a fourth consecutive weekly decline in US stockpiles.
Kazakhstan will fully comply with its obligation to cut oil production by 40,000 barrels a day in the first half of 2019, in line with the OPEC+ agreement reached in Vienna in early December, Energy Minister Kanat Bozumbayev said Vagit Alekperov, president of Lukoil PJSC, forecasts crude will be stable at $60 or slightly more next year thanks to the OPEC+ pact.