Oil prices rose above $60/bbl on Nov. 26, recovering some of the previous session’s near-7% fall, although uncertainty over global economic growth limited the gains.
Brent crude futures LCOc1 were up $1.30 at $60.10/bbl by 1255 GMT, while U.S. futures CLc1 were up 77 cents at $51.19/bbl after a sell-off which saw both contracts hit 13-month lows.
“It is difficult to say whether $60 is the new normal, as there doesn’t seem to be a ‘normal’ at the moment,” Cantor Fitzgerald oil and gas analyst Jack Allardyce said.
“The recent weakness seems dramatic given the lack of actual catalysts – it seems to have been driven by a wider impending sense of doom amidst weak equities, geopolitics, subsequent softening demand and increasing supply,” he said.
The International Energy Agency predicts global oil demand will top 100 million barrels (MMbbl) a year in 2019, growing at a rate of 1.4 MMbbl/d, but this is down from its initial assessment in June of 1.5 MMbbl/d.
A rising dollar that has undercut demand in key emerging market economies, higher borrowing costs and the threat to global growth from the trade dispute between the United States and China have pushed investors out of assets more closely aligned with the global economy, such as equities or oil.
In November alone, hedge funds have pulled more than $12 billion out of the oil market, based on a record drop in net long holdings of Brent and U.S. crude futures and options against the average oil price for the month.
Analysts at Fitch Solutions said that even an expected supply cut led by the Organization of the Petroleum Exporting Countries (OPEC) following an official meeting on Dec. 6 “may not be enough to counteract the bearish forces”.
The options market shows that investors in Brent crude, which is more closely linked to OPEC output, have increased their holdings of contracts that give the owner the right, but not the obligation, to sell oil futures below the current benchmark futures price, by 10%.
This compares with an increase of just 4.5% in holdings of options that give the owner the right to buy oil futures above the current price by a certain date.
Recommended Reading
Buffett: ‘No Interest’ in Occidental Takeover, Praises 'Hallelujah!' Shale
2024-02-27 - Berkshire Hathaway’s Warren Buffett added that the U.S. electric power situation is “ominous.”
CEO: Coterra ‘Deeply Curious’ on M&A Amid E&P Consolidation Wave
2024-02-26 - Coterra Energy has yet to get in on the large-scale M&A wave sweeping across the Lower 48—but CEO Tom Jorden said Coterra is keeping an eye on acquisition opportunities.
Why Endeavor Energy's Founder Sold His Company After Years of Rebuffing Offers
2024-02-13 - Autry Stephens', the 85-year-old wildcatter, decision to sell came after he was diagnosed with cancer, according to three people who discussed his health with him.
Hess Corp. Boosts Bakken Output, Drilling Ahead of Chevron Merger
2024-01-31 - Hess Corp. increased its drilling activity and output from the Bakken play of North Dakota during the fourth quarter, the E&P reported in its latest earnings.
Exxon, Chevron Tapping Permian for Output Growth in ‘24
2024-02-02 - Exxon Mobil and Chevron plan to tap West Texas and New Mexico for oil and gas production growth in 2024, the U.S. majors reported in their latest earnings.