USA crude was trading at US$36.86 a barrel, down 79 cents from its last settlement.
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Crude oil futures plummeted to their lowest price in almost seven years on Monday after OPEC failed to slow its pumping into a supply glut, and a stronger dollar made it more expensive to hold crude positions.
Brent crude oil prices, the global benchmark, rose 1.1 per cent at $40.70 per barrel this morning, while US West Texas Intermediate jumped 1.6 per cent at $38.05 per barrel.
Meanwhile the price per barrel has tumbled from US$115 to around $40 a barrel now.
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Oil prices have fallen by more than 50 percent in a little over a year from levels of well over $100 a barrel, provoked by the slowdown in China and other emerging market economies and the end of sanctions against Iran.
“There was somewhat more positive data, but Organisation of the Petroleum Exporting Countries (Opec) is not going to support the market and I think there’s a high probability that we will break through the lows of 2008”, said Bjarne Schieldrop, chief commodities analyst at SEB in Oslo.
Total oil production in the world exceeds global oil demand by around 2.5 to 3 million barrels per day at the moment.
BP has “reset” its business to generate surplus cash flow with oil at about $60 a barrel by 2017.
“Oil is still bearish”, said Tamas Varga, an analyst at broker PVM Oil Associates, noting that the first and second quarters of the year were the weakest in terms of demand. “Shale production in the U.S. is starting to tail off. And major oil companies have shelved a number of projects elsewhere in the world”, he said.
Some OPEC countries want to turn off the taps to control supply and the price per barrel, but the world’s largest producer, Saudi Arabia, refused to do so unless every oil producing country agreed to do so.
The ringgit has nearly been in lockstep with the price of crude oil, often moving in the direction crude oil trades.
Despite Wednesday’s early uptick in prices, many analysts aren’t convinced that the market’s sentiment has lifted and predict further falls for Brent this week. While the decision was expected, it still sent prices reeling as the market braced itself for a “lower for longer” scenario.
“With prices down sharply, the incentive to cut holdings is the lowest in years, but we still anticipate some further decline in stocks over the next few weeks”, Mr. Evans said.
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With a flurry of buying of options contracts on Monday, as traders sought protection from falling oil prices after the OPEC meeting, front-month volatility spiked.
