LONDON: Oil prices steadied on Tuesday as traders covered short positions after a week of falls, but gains were capped by worries about oversupply and the health of the global economy.
Brent crude LCOc1 dropped $1.85 a barrel, or 3.7 percent, on Monday and was unchanged at $48.61 by 0810 on Tuesday. U.S. light crude CLc1 was up 20 cents at $46.09 after closing down $1.37, or 3 percent. The November contract expires on Tuesday.
“This is the usual pattern,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. “Oil prices rebound after a big fall and that is what we have seen today.”
“We are now near the bottom of the recent range, which is not surprising, given the bearish sentiment and focus on global oversupply,” Fritsch added.
Ben Le Brun, market analyst at Sydney’s OptionsXpress said “short-covering has led to a little bit of a rally” but worries over slowing economic growth in China, the world’s second-largest economy, were weighing on the market.
China’s GDP growth slowed to 6.9 percent in the third quarter, down on a 7-percent rise in the prior quarter, while implied oil demand was also lower, official figures and Reuters data on Monday showed.
“Fundamentals remain a little bit stressed,” Le Brun said.
Major oil exporters in the Middle East are pumping around 2 million barrels per day (bpd) more crude oil than needed at the moment, analysts say, filling inventories around the world.
On top of this, Iran is expected to boost oil production when international sanctions are lifted after it implements the conditions of a nuclear deal agreed with major world powers.
A senior Iranian oil official said on Monday Tehran planned to increase crude production by 500,000 bpd within a week of the lifting of sanctions, selling the oil to traditional customers in Asia and Europe.
Industry group the American Petroleum Institute (API) will report its stocks data later on Tuesday, while the U.S. Department of Energy’s Energy Information Administration (EIA) will release oil inventory data on Wednesday.
U.S. commercial crude oil stockpiles likely rose last week for the fourth consecutive week, a Reuters survey said.
Investors awaited a meeting of oil experts from the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers due on Wednesday which was due to discuss proposals for possible cooperation in future.