Oil prices steadied on Friday, finding some stability after falling 10 percent in a week as investors drew breath ahead of the long festive break, but the outlook remained nervous with many investors staying on the sidelines.
Brent crude <LCOc1> was down 45 cents at $53.90 per barrel by 1035 GMT, after dropping $2.89 or 5.0 percent on Thursday and was set for a loss of around 10.6 percent this week.
U.S. light crude oil <CLc1> was down 20 cents at $45.68, on course for a decline of 10.7 percent for the week.
Crude has lost ground along with major equity markets as investors fret about the strength of the global economy heading into next year. Further concerns were raised as the United States, the world’s biggest oil consumer, may have a government shutdown later on Friday. [MKTS/GLOB]
Since reaching multi-year highs at the beginning of October, both crude oil benchmarks have lost more than a third of their value in their steepest collapse for three years.
Driving the sell-off has been sustained oversupply as the United States has emerged as the world’s biggest crude producer thanks to the success of its shale industry.
The United States now pumps 11.6 million barrels per day (bpd) of crude, putting it ahead of Saudi Arabia and Russia.
The big oil producers in the Organization of the Petroleum Exporting Countries, dominated by Middle East Gulf states which mostly rely on energy exports, have agreed to reduce production to try to push up prices.
But those output cuts – a reduction with Russia and other non-OPEC producers of 1.2 million bpd – won’t kick in until next month, and meanwhile global inventories are filling up fast.
“The bear fest continues,” said Stephen Brennock, analyst at London brokerage PVM Oil.
“According to OPEC’s own forecasts, global oil stocks will build by 500,000 bpd in the first half of 2019. This will compound a glut in OECD commercial oil stocks.”
In an effort to show its commitment to reducing supply, OPEC plans to release a table detailing the output cut quotas for its members and allies such as Russia, OPEC Secretary General Mohammad Barkindo said in a letter reviewed by Reuters. [nL8N1YP2AD]
To reach the proposed cut of 1.2 million bpd, the effective reduction for member countries was 3.02 percent, Barkindo said.
That is higher than the initially discussed cuts of 2.5 percent as OPEC seeks to accommodate Iran, Libya and Venezuela, which are exempt from any requirement to cut.
Stephen Innes, head of trading for Asia-Pacific at OANDA said in a note that market volatility was “getting exaggerated by immensely thin liquidity conditions, risk sentiment, and holiday market participation”, adding: