Yemisi Izuora
Oil prices responded positively on Wednesday, steadying after a more than 4 per cent fall in the previous session, as extended output cuts by OPEC and its allies helped underpin prices despite growing concerns about weak demand.
An expected large draw in crude oil inventory in the United States also buoyed sentiment after a bigger-than-expected fall in inventories in a private survey.
Brent crude futures for September delivery were trading up 48 cents, or 0.8 per cent, at $62.88 a barrel while the US crude futures for August were up 37 cents, or 0.7 per cent, at $56.62 a barrel. Both benchmarks fell sharply on Tuesday as worries about a slowing global economy overshadowed Opec supply cuts.
The Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as Opec+, agreed on Tuesday to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices.
“The Opec+ meeting showed the members sticking together in tough times, characterized by weakening global demand outlook, aiming for a more balanced oil market, despite clear market share implications,” said Amarpreet Singh, analyst at Barclays Commodities Research in a note.
“This is supportive of oil prices, in our view, even as the market remains squarely focused on weak macro signals.”
Ahead of government data due later on Wednesday, industry group the American Petroleum Institute, API, said that US crude inventories fell by 5 million barrels last week, more than the expected decrease of 3 million barrels.
Still, signs of a global economic slowdown hitting oil demand growth worried investors after global manufacturing indicators disappointed and the US opened another trade front after threatening the EU with more tariffs to offset government aid to the aviation industry.
Barclays expects demand to grow at its slowest pace since 2011, gaining less than 1 million barrels per day year-on-year this year.
Morgan Stanley, meanwhile, lowered its long-term Brent price forecast on Tuesday to $60 per barrel from $65 per barrel, and said the oil market is broadly balanced in 2019.