Oil futures on Wednesday registered their first climb in three sessions, recouping much of the loss they suffered a day earlier, but worries over demand prospects remained, with prices holding onto a sizable week-to-date loss.
Overall weakness for oil “continues to stem from broader economic uneasiness as U.S.-China trade tensions linger and a critical Brexit deadline is fast approaching,” said Robbie Fraser, senior commodity analyst at Schneider Electric.
“Beyond representing potential sources of future demand risk, those headwinds have already been connected to much weaker demand growth in 2019,” he said in a daily note. The International Energy Agency, Energy Information Administration, and Organization of the Petroleum Exporting Countries “have all consistently revised year-on-year demand expectations lower in recent quarters.”
West Texas Intermediate crude for November delivery added 55 cents, or 1%, to settle at $53.36 a barrel on the New York Mercantile Exchange, following a two-day skid for the U.S. benchmark. It trades about 2.4% lower for the week so far. The global benchmark, December Brent crude , added 68 cents, or 1.2%, at $59.42 a barrel on ICE Futures Europe, trading down 1.8% week to date.
“For now, WTI is holding onto key support at $52...and as long as there are no major negative developments in the near term, futures should be able to hold onto that area and remain in the roughly $10 range that has been in place now for months,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. “The simmering trade war and potential earnings shock are two potential negative catalysts.”
Concerns remain over the global economic outlook and the implications for oil demand after the International Monetary Fund on Tuesday cut its forecast for global economic growth this year to 3%, the slowest pace since 2008.
Weekly U.S. petroleum supply data are delayed by a day this week because of Monday’s Columbus Day federal holiday. The American Petroleum Institute will release its report late Wednesday, with official data from the EIA due out Thursday, after the EIA’s weekly natural-gas supply figures. The EIA has reported weekly increases in crude stockpiles for four weeks in a row.
The EIA data are expected to show crude inventories up by 4 million barrels last week, according to analysts polled by S&P Global Platts. They also forecast supply declines of nearly 1.8 million barrels for gasoline and 2.6 million barrels for distillates.
Meanwhile, the EIA on Tuesday also forecast U.S. shale oil production to rise 58,000 barrels a day in November to a record 8.971 million barrels a day.
The Permian Basin accounts for the bulk of the increase, with the region, at 4.61 million barrels a day, making up more than half of the total U.S. shale oil supply, noted Carsten Fritsch, analyst at Commerzbank, in a note.
On a global level, “the monumental surge in tanker rates following U.S. sanctions on Chinese shippers continues to complicate oil flows, with reports indicating a number of Asian refiners declining to make spot purchases due to the vessel rate,” said Fraser.
“That could pull more products out of storage until costs approach more normal levels, providing some temporary support to refined product prices and leaving some crude cargoes stranded or diverted into storage themselves,” he said.
Freight rates to ship U.S. crude to Asia fell from record highs on Tuesday, but costs had risen to as high as $11 a barrel in the past two weeks, Reuters reported , citing market sources.
In other energy trade, November gasoline rose 0.6% to $1.6248, while November heating oil rose 1.7% to $1.9426 a gallon. November natural gas shed 1.5% to end at $2.303 per million British thermal units.
The EIA on Thursday is expected to report a weekly rise of 108 billion cubic feet in U.S. natural-gas stocks in storage, according to a survey of analysts conducted by S&P Global Platts.