Oil fell below $US60 per barrel overnight after US crude inventories rose for the 10th straight week amid concerns about excess global supply.
Prices, however, rose from the day’s lows in tandem with a rally in stocks after a speech from Federal Reserve Chair Jerome Powell, who said risks to the US economy are relatively balanced, suggesting the pace of interest-rate hikes may slow in coming months.
In the last three days, oil investors have been more willing to buy on declines after a rout that took crude futures down by 30 per cent since the beginning of October.
Brent crude was down 32 cents, or 0.5 per cent, at $US59.89 a barrel, after falling as low as $US59.03.
US crude fell 25 cents to $US51.31 a barrel, up from its session low at $US50.61.
In a speech, Powell said the Fed had no ‘pre-set’ policy path, suggesting the central bank’s steady rate of interest-rate increases could slow in coming months.
Powell has been heavily criticised by US President Donald Trump, who has broken with decades of precedent to weigh in often on Fed policy.
‘He’s now acknowledging he’s close to neutral which suggests maybe not quite as many rate hikes in the future as investors believed,’ said Jack Ablin, chief investment officer at Cresset Wealth Advisors in Chicago.
‘It’s certainly a change of language and welcome news to investors.’
US crude stockpiles rose 3.6 million barrels last week, exceeding expectations.
After falling to two and a half year lows in September, crude stocks have risen 14 per cent with 10 straight weeks of increases.
The steady build in US crude stocks is partly due to seasonal refining maintenance, but domestic production also has surged to a record 11.7 million barrels per day.
US stockpiles sit at 450 million barrels, the most in a year, adding to worries about a return of a worldwide supply glut.
‘It’s hard to get more bearish after this report after we wiped out more than 30 per cent of our value in the last two months,’ said Gene McGillian, vice president of market research for Tradition Energy in Stamford, Connecticut.
The price of Brent has dropped by more than 30 per cent from a four-year high above $US86 in early October.
Investors sold oil over worries about slowing economic growth in 2019 and Washington’s decision to grant several waivers to importers of Iranian oil after re-imposing sanctions on that nation.
Crude’s drop since October is on a par with the 2008 price crash and steeper than that of 2014-2015, both of which prompted the Organisation of the Petroleum Exporting Countries to agree output curbs to support the market.
The market remains nervous over whether OPEC-led producing countries, including Russia, will reach a deal when they meet on December 6.
Producers are discussing a supply curb of one million to 1.4 million bpd and possibly more, OPEC delegates have told Reuters.
Saudi Arabia said it would not cut output alone and Nigeria stopped short of committing to a new push to curb supplies.
The outcome of next week’s OPEC meeting ‘remains clouded by uncertainty,’ said Stephen Brennock of oil broker PVM.