Brent’s premium over US crude was below $2 a barrel, versus almost $4 at the start of November.
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Both crude benchmarks saw high levels of activity in early trading as markets looked nervously for direction following the deadly attacks in Paris on Friday.
Analysts said widening of positions by participants on the back of a firm Asian trend, mainly led to further rise in crude oil prices at the futures trade.
The sharp decline in oil sector investment, which is predicted by the worldwide Energy Agency (IEA), will be result of the problems regarding storage of excess oil, aimed at avoiding a complete collapse in oil prices, expert Sam Barden believes.
Official inventory data is due later on Wednesday from the USA government’s Energy Information Administration (EIA). The WTI contract for December enters its last two days of trading and traders are already looking toward January.
Most open interest in options expiring in December is clustered around put options – which give the holder the right, but not the obligation, to sell Brent futures – at $40 a barrel. USA commercial crude inventories increased by 300,000 barrels last week, maintaining a total US commercial crude inventory of 487.3 million barrels.
Rising USA stockpiles were the most visible evidence of oil markets being over supplied.
Oil traders are preparing for another downward turn in prices by March 2016, market data suggests, as what is expected to be an unusually warm winter dents demand just as Iran’s resurgent crude exports hit global markets after sanctions are ended.
If the USA benchmark falls through the psychologically key $40-a-barrel level, prices could fall to new multiyear lows in the mid-$30s, a few analysts say.
China’s slowing economy has also impacted other commodities, including copper, which dropped to a near six-year low on Wednesday.
The USA more than doubled its imports of oil from Iraq between August and September, according to a Platts analysis.
Oil ministers from OPEC claim they need at least until next month to decide if this rebound is for real, or simply a temporary phenomenon.
“Yesterday’s rally was a reaction to the likely increase in geopolitical risk despite the fact Syria itself is not a big oil producer”, said Pete Donovan, broker at New York’s Liquidity Energy. Oil even briefly topped $50 a barrel in early October after Russian Federation launched military operations in Syria, raising the specter of supply disruptions.
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That’s negative for oil prices because the massive growth in American oil production is what caused prices to crash in the first place.
