USA stocks ended slightly higher as energy shares rose with oil prices and the S&P energy index ended up 2.2 percent.
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U.S. West Texas Intermediate (WTI) futures CLc1 fell 37 cents to $42.50 a barrel, having gained $1.12 to $42.87 on Tuesday.
Oil prices were off 2% on Wednesday as the narrative turned back to oversupply rather than geopolitical conflicts.
But reports that Russian Federation is not taking military action against Turkey in retaliation eased fears that the tense situation in the region could escalate and disrupt Middle East oil supplies.
Crude futures had erased early losses to settle steady on Wednesday as well after a smaller-than-expected supply build in the United States and drop in the number of USA rigs actively drilling for oil.
Oil prices pushed higher on Tuesday, as Saudi Arabia’s pledge to work towards stabilizing the market continued to lend support, while investors focused on a global supply glut.
“Traders are opting to sit on the side lines, especially ahead of the U.S. Thanksgiving holiday”, Stephen Innes, a senior foreign exchange trader for OANDA, said in a commentary.
“From a fundamental point of view, an increase in OPEC’s production quota is much required; Indonesia’s inclusion into the cartel will add roughly 800,000 barrels a day into the overall production pipeline will give OPEC the flawless excuse to propose a higher quota”, said Gan.
Energy economist James Williams, of WTRG Economics, said the market was paring down some of the surge in prices resulting from Turkey’s shoot down Tuesday of a Russian warplane on the Syrian border.
But brokers and analysts also see fading demand growth, a troubling sign for prices in a world where production and stockpiles are still high.
“The futures forward price curve and many bank forecasts are indicating that there is no relief next year with the Brent price averaging $5 to 7 below this year’s average”, PVM’s David Hufton said in a note, adding the revenue impact of current prices has been “disastrous”.
Just one month ago a report from OPEC stated that its members collectively produced 31.5 million barrels per day (in Sept.) and that volume represented the most since 2012.
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The US Federal Reserve is projected to raise its benchmark rate from near zero at its December 15-16 meeting, the first gain in nearly a decade.
