Oil surged overnight, posting its strongest daily gain in more than two years in a partial rebound from steep losses that pushed crude benchmarks to lows not seen since 2017.
Both US and Brent crude rose about eight per cent, their largest one-day increase since November 30, 2016, when OPEC signed a landmark agreement to cut production.
It was unclear whether follow-through buying would push prices higher again once trading desks are more fully staffed after the new year begins.
Crude has been caught up in wider market weakness as the US government shutdown, higher US interest rates and the US-China trade dispute unnerved investors and exacerbated worries over global growth.
‘The market is still really concerned about demand,’ said Bernadette Johnson, vice president in market intelligence at DrillingInfo in Denver.
The sell-off ‘doesn’t signal strength of confidence in demand, but we still went too far too quick. We still believe $US45 is too low.’
US crude settled at $US46.22 a barrel, up $US3.69, or 8.7 per cent.
Even with the day’s gains, US crude has still lost nearly 40 per cent from its October closing high at more than $US76 a barrel.
Brent crude, the global benchmark, rose $US4, or 8 per cent, to settle at $US54.47 a barrel.
It earlier fell to $US49.93, lowest since July 2017.
Recent selling ‘has felt less fundamentally driven and more a function of the overall market meltdown as increased equity volatility and growing macro concerns have weighed on a number of asset classes,’ wrote analysts at Tudor, Pickering & Holt.
Funds have incurred heavy losses in oil markets this year, with the average commodity trading adviser fund, or CTA, down by 7.1 per cent on the year through mid-December, according to Credit Suisse data.
The head of Russian oil company Rosneft, Igor Sechin, predicted an oil price of $US50 to $US53 in 2019, far short of the four-year high of $US86 for Brent crude reached earlier this year.
Still, oil’s outlook is not as weak as in 2016 when a supply glut built up, because the Organisation of the Petroleum Exporting Countries this time is trying to prop up the market, Jakob said.
The Organisation of the Petroleum Exporting Countries and its allies including Russia decided earlier this month to cut production in 2019, unwinding a June decision to pump more oil.
The combined group plans to lower output by 1.2 million bpd next year.