Oil prices recover with rebound in stocks, Fed in focus
Global oil market focuses on much-awaited US Federal Reserve meeting
By Ovunc Kutlu
Crude oil prices recovered Wednesday from a three-day slump, as the rebound in U.S. stock markets shifted the sentiment among investors towards optimism, who now focus on signals that will come from U.S. Federal Reserve.
International benchmark Brent crude fell 5.9 percent on Tuesday to post losses for a third consecutive trading day, but gained 0.9 percent to trade at $56.60 per barrel at 0610 GMT on Wednesday.
American benchmark West Texas Intermediate (WTI) lost 6.5 percent on Tuesday, also falling for the third trading day in a row; however, the benchmark bounced back to trade at $46.79 a barrel at the same time -- a 0.3 percent gain for the day.
Forecasts of rising shale oil production in the U.S.' major shale plays intensified worries among investors that the glut of supply in the global oil market would increase, pushing crude prices lower in previous days.
In the U.S., total shale oil output in the most prolific seven shale plays in the country is expected to increase by 201,000 barrels per day (bpd), or 2.5 percent, to reach a record high level of 8.03 million bpd in December from the previous month, according to the EIA's Drilling Productivity Report on Monday.
Shale oil production is estimated to continue to climb in those seven plays to rise by another 134,000 bpd, or 1.7 percent, to a fresh record of 8.17 million bpd in January, the report said.
However, a force majeure in Libya's largest oil field Sharara has cut off some crude supply from the global oil market, which also provided some support for a price increase.
Libya's National Oil Corporation (NOC) declared a force majeure on Dec. 10, stating that shutdown of the Sharara oil field would cause a production loss of 315,000 bpd, with an additional loss of 73,000 bpd at the El Feel oil field since it depends on Sharara for electricity supply.
On the demand side, the rebound in U.S. stock markets provided optimism for investors that crude oil demand could increase to push oil prices higher.
After posting major losses for two consecutive trading days, the Dow Jones and the S&P 500 in the New York Stock Exchange both picked up on Tuesday to gain 0.36 percent and 0.01 percent, respectively. The Nasdaq ended Tuesday up 0.45 percent.
The global oil market will also focus on the much-awaited meeting of the U.S. Federal Reserve on Wednesday.
Although the central bank will almost certainly increase its benchmark interest rate, investors and the markets will closely watch its projections for next year.
If the Fed signals more rate hikes than market estimates for 2019, this would push the value of the American dollar up, bring oil demand low, and push crude prices lower.
For next year, if the bank signals less hikes, this would pull down the value of the greenback, and global oil demand could increase, which then could lead to higher oil prices.Anadolu Agency website contains only a portion of the news stories offered to subscribers in the AA News Broadcasting System (HAS), and in summarized form. Please contact us for subscription options.