LONDON: Oil rose on Wednesday, recouping some of the previous session’s slide, on the growing prospect of OPEC and allied producers cutting output at a meeting next month to prop up the market.
Prices rallied towards $67 after Reuters reported OPEC and its partners are discussing a proposal to cut output by up to 1.4 million barrels per day (bpd), a larger figure than officials have mentioned previously.
International benchmark Brent crude LCOc1 was up $1.43 a barrel at $66.90 by 1453 GMT, having fallen as low as $65.02. U.S. crude CLc1 was up 82 cents at $56.51.
“The dramatic selling across the oil markets in recent days has come to a brief pause,” said Jameel Ahmad, head of market research at futures brokerage FXTM.
“It is very much possible that the oil markets have not yet found a floor.”
The price of Brent has fallen by over 20 percent since early October on concern about excess supply and slowing demand, one of the biggest declines since a price collapse in 2014.
“While the focus was on the Iran embargo and Venezuela’s output struggles over the past months, i.e. the risks of too little supply, the market increasingly looks concerned about the prospects of too much supply,” Swiss bank Julius Baer said.
In its monthly report the Paris-based International Energy Agency (IEA) said the implied stock build for the first half of 2019 is 2 million bpd.
The IEA left its forecast for global demand growth for 2018 and 2019 unchanged from last month at 1.3 million barrels per day (bpd) and 1.4 million bpd, respectively, but cut its forecast for non-OECD demand growth, the engine of expansion in world oil consumption.
Oil markets are being pressured from two sides: a surge in supply from OPEC, Russia and other producers, and increasing concerns about a global economic slowdown.
U.S. crude oil output from its seven major shale basins is expected to hit a record 7.94 million barrels per day (bpd) in December, the U.S. Department of Energy’s Energy Information Administration (EIA) said on Tuesday.
That surge in onshore output has helped overall U.S. crude production C-OUT-T-EIA hit a record 11.6 million bpd, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.
Most analysts expect U.S. output to climb above 12 million bpd in the first half of 2019.
The rise in U.S. production is contributing to higher stockpiles.
Official storage data is due on Wednesday from the Energy Information Administration, with analysts expecting a 3 million barrel rise in crude inventories.