Investing.com - Has New Year salvation for oil come early?
U.S. West Texas Intermediate crude rebounded forcefully on Wednesday as markets reopened from the Christmas holiday, surging more than 6% to recoup almost all of what it lost in Monday's session just before the break.
U.K. Brent crude saw a little less fervor, rising about 5%, as markets in Britain remained closed for Boxing Day.
By 12:03 AM ET (17:03 GMT), WTI was up $2.85, or 6.7%, at $45.38 per barrel. It ssettled down $3.06, or nearly 7% on Monday, after hitting June 2017 low of $42.53. Despite the rebound, WTI remains down 25% on the year and is off 42% from four-year highs of nearly $77 a barrel hit in early October.
Brent rose $2.75, or 5.4%, to $53.52, after making a Aug 2017 low of $50.66 on Monday. Brent remains down 20% on the year and is off 41% from four-year highs of nearly $87 a barrel hit in early October.
The Christmas Eve rout was linked to fears of a potential global economic slowdown and the possibility of a protracted U.S. government shutdown over the budget that pushed Wall Street's S&P 500 to near-bear-market territory. Stocks rallied in midday trading, adding fuel to oil's recovery.
"It looks like there's some help for oil now before the year-end because the selloff on Christmas Eve was probably overdone," said Phil Flynn, senior energy analyst at The Price Futures Group brokerage in Chicago. "But conversely, you can argue that this rebound is also overdone because we just don't know if the bears will return in force after this."
Funds have incurred heavy losses in oil this year, with the average commodity trading adviser fund, or CTA, down by 7.1% on the year through mid-December, Reuters reported, citing Credit Suisse (SIX:CSGN) data.
While economic worries have weighed on the market, the outlook for oil is not as weak as in 2016 when a supply glut built up because OPEC this is trying to prop up the market, Olivier Jakob, analyst at Petromatrix, said.
Saudi-led OPEC and its non-member allies led by Russia agreed in early December to collectively cut production by a total of 1.2 million barrels a day during the first six months of 2019 in an effort to stave off a global glut in supplies.
Should that fail to balance the market, OPEC and its allies will hold an extraordinary meeting, United Arab Emirates Energy Minister Suhail al-Mazrouei said on Sunday.
Wednesday's rebound notwithstanding, traders have braced themselves in recent days for the possibility of WTI falling below $40 a barrel before the year is out.