Oil fell to near three-month lows and USA crude futures slipped to below US$40 a barrel before settling higher on Wednesday as short-covering lifted a market initially suppressed by worries about a global supply glut.
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Likewise, the oil for delivery in November traded higher by Rs 21 or 0.77 per cent to Rs 2,756 per barrel in 4,852 lots.
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.
A rise in US oil stockpiles seen in recent weeks is unlikely to change this week due to the continuing refinery maintenance season. USA commercial crude inventories increased by 300,000 barrels last week, maintaining a total US commercial crude inventory of 487.3 million barrels.
“With all of the fundamental signs still pointing to lower prices. the downtrend (is) still the dominant trend in the oil complex”, Dominick Chirichella from New York’s Energy Management Institute said in an analyst note.
Crude oil stocks at Cushing rose by 1.5 million barrels, which is a sharper increase than anticipated but one which tallies nonetheless with the API survey. Light, sweet crude for December delivery recently traded down 22 cents, or 0.5%, to $40.53 a barrel on the NY Mercantile Exchange.
But gains in demand have been outpaced by vigorous production from the Organisation of the Petroleum Exporting Countries, OPEC, and resilient non-OPEC supply, with Russian output at a post-Soviet record and likely to remain robust in 2016 as well.
Oil prices fell on Thursday, with USA crude dipping below $40 per barrel, retreating from early gains amid a persistent global glut of crude and refined fuel.
Oil dropped to as low as $39.91 a barrel on Wednesday.
“There have been reports that the USA is now targeting ISIS (Islamic State) oil tankers, oil facilities, and that definitely is giving the market a little bit of a boost”, he said. “The impact of oil’s steep price plunge on end users is unlikely to be repeated and economic conditions are forecast to remain problematic in countries such as China”.
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A slowdown in Asia’s economies and in particular in China, is hitting the other commodities. Still as oil prices have cratered since mid-2014, American producers have pulled shuttered or mothballed 1,161 rigs in the U.S over the last 12 months as the cost of production largely no longer justify keeping them active.
