Futures of Brent crude were up over $1.05 Wednesday after settling 99 cents lower on Tuesday.
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Oil prices retreated on Monday, failing to hold on to gains won earlier in the day on geopolitical tensions sparked by the deadly terror attacks in Paris.
Goldman and other analysts say persistently high US shale oil output that producers aren’t allowed to export could overwhelm the country’s storage tanks, which are already filled with near-record inventories. The price of copper dropped to near lows of six years Wednesday as metal traders increased bets on the waning demand of China, the metal’s top user.
Front-month United States crude futures were trading at $41.86 a barrel at 0207 GMT, up 12 cents from their last close and over a dollar above last week’s more than two-month low.
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As a result, US crude futures have been struggling to break higher this week, although ANZ bank said rising crude demand from USA refineries was also preventing prices from falling much further. Many speculators are preparing for further price falls.
At the core of the bearish sentiment is that every day between 0.7-2.5 million barrels of oil per day are being produced in excess of demand, leading to a glut that is testing the logistics of oil markets.
Oil exchange traded funds erased early losses Monday, with West Texas Intermediate crude oil futures rallying, after crude prices flirted with the psychologically key $40-per-barrel level.
A Reuters poll of analysts forecast that USA crude stockpiles rose for an eight straight week last week, building by 1.6 million barrels to reach near-record highs above 490 million seen in April. This “would likely be the trigger for adjustments through the physical market, pushing oil prices down to cash costs, which we estimate are likely around $20 (13 pounds) per barrel”, the bank added.
The additional buying pressure may have helped support the slipping oil prices, which have been steadily declining as the global supply glut widens.
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It’s the latest sign that the world still has more oil than it needs despite production cuts in the U.S. This is great news for American drivers, many of whom will soon be enjoying gasoline prices below $2-a-gallon. That’s the cheapest price since the final week of August when market mayhem rocked Wall Street amid fears about China’s economic slowdown. North America, Europe, and Asia all run significant production deficits, with the Middle East, Africa, Latin America, and Former Soviet Union are global engines of crude oil supply.
