Oil prices rebounded slightly on Wednesday following a steep drop in the past meeting as OPEC and the decision of its allies to extend production reductions was not sufficient to combat the worries of investors about the slowing global economy.
Prices were backed by widespread information indicating a larger-than-expected drawdown in U.S. crude oil inventories, with information from the government due later in the day.
Brent crude futures LCOc1 were up 49 cents by early trading at $62.89 a barrel for September shipment.
The U.S. crude futures were up 39 cents at $56.64 a barrel for August CLc1. On Tuesday, both benchmarks dropped more than 4% as concerns about a slowing worldwide economy increased.
The Organization of the Petroleum Exporting Countries (OPEC) and other producers such as Russia agreed on Tuesday to extend cutbacks in oil supply until March 2020 as participants overcame disagreements in an attempt to support prices.
“We had a pretty sharp correction yesterday; so after that, a little rebound is expected. Globally, the market is concerned about oil demand growth potential,” Olivier Jakob of Petromatrix consultancy said.
“Extending the cut by six or nine months, it doesn’t really matter if the level stays the same.
“If you (OPEC) really wanted to target stock levels, you would need deeper cuts but Saudi Arabia has already gone beyond its cut target.”
The American Petroleum Institute (API) sector group said, ahead of public information due later on Wednesday, that U.S. crude inventories dropped by five million barrels last week, more than three million barrels anticipated to fall.
In the second half of this year, the OPEC arrangement to extend nine-month oil production reductions should draw down oil inventories, boosting oil prices, Citi Research analysts said in a note.
“Keeping cuts through the end of 1Q aims to avoid putting oil into the market during a seasonal low for demand and refinery runs,” they said. (Reuters/NAN)
