Oil rebounds from steep slide but growth fears still weigh

Oil rebounds from steep slide but growth fears still weigh

Oil edged up to $51 a barrel on Wednesday after reaching its lowest since June 2017 on perceptions that a price slide prompted by worries over the global economy had been overdone amid an OPEC-led effort to tighten supply. With most authorities forecasting a slowdown in its growth next year, the concern about how crude oil demand will be faring in 2019 is only to be expected.

While economic worries have weighed, the outlook is not as weak as in 2016 when a supply glut built up, because the Organization of the Petroleum Exporting Countries this time is trying to prop up the market, Jakob said.

The decline in prices prompted USA shale producers to cut back on their drilling plans for next year. However, the market seems to be ignoring this move as oil prices are continuously falling in the worldwide market despite this production cut. A recovery in the US stock markets could help drive prices higher because of a shift in investor sentiment, but these gains are likely to be limited by rising concerns over a global economic slowdown.

At the same time, an ongoing trade war between the US and China and the Federal Reserve's rate policy are causing concerns over global economic growth.


Global benchmark Brent was trading down 6.2 percent, at $50.47 a barrel as of 9:12am GMT.

"OPEC has shown it wants a higher prices and is working towards that goal".

"Most major economies are likely to see decelerating activity, with real GDP growth of 1.4 percent in both Europe and Japan, and 4.6 percent growth in aggregate among the emerging markets", BofA Merrill Lynch said recently.

Elsewhere, U.S. political turmoil triggered by the partial shutdown of the federal government is also adding to market concerns.


"The short-term pain of lower oil prices for companies and producers can overshadow the long-term gains for oil consumers, as in 2015".

"As stocks get taken down and there is nervousness across financial markets, it's just undercutting prices here", said John Kilduff, a partner at New York-based hedge fund Again Capital. The S&P 500 Index sank 1.8 percent, with its energy index shedding 3.2 percent. "We are back to a strong dollar during market turbulence as well as equity prices reverting to a barometer of future demand", the analyst said.

"The planned cuts have been carefully studied, but if it doesn't work, we always have the option to hold an extraordinary OPEC meeting and we have done so in the past", Suhail Al Mazrouei, who is also OPEC president, said in Kuwait.


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