Oil prices rose nearly 3 per cent on Monday, clawing back some of last week’s steep losses, but gains were capped by uncertainty over global economic growth and further signs of increasing supply, including record Saudi production.
Brent crude futures rose $1.68 to settle at $60.48 a barrel, a 2.9-per-cent gain. U.S. West Texas Intermediate (WTI) crude gained $1.21, or 2.4 per cent, to close at $51.63 a barrel.
Prices on Friday hit their lowest since October 2017 amid intensifying fears of a supply glut. Brent sank to $58.41 a barrel, while WTI fell to $50.15 a barrel.
“We are reluctant to read much into today’s oil price advance given a much oversold technical condition that needed only a moderate stock market rally to force some short covering,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Supporting oil prices, U.S. stock markets broadly rallied as Cyber Monday, the largest online shopping day of the year, began. Crude futures sometimes track with the equities market.
Prices found some support as crude stockpiles at the delivery point for WTI at Cushing, Oklahoma, rose just 126 barrels from Tuesday to Friday, traders said, citing a report from market intelligence firm Genscape.
However, demand concerns and record output from Saudi Arabia limited Monday’s rebound.
Saudi crude oil production hit 11.1-11.3 million barrels per day (bpd) in November, an all-time high, an industry source said.
A rising dollar that has undercut demand in key emerging market economies, higher borrowing costs and the threat to global growth from the trade dispute between the United States and China have pushed investors out of assets more closely aligned with the global economy, such as equities or oil.
Hedge funds and other money managers raised their bullish position on U.S. crude for the first time in 8 weeks in the week that ended Nov. 20, the U.S. Commodity Futures Trading Commission (CFTC) said on Monday.
The increase was the first since September and lifted net longs from their lowest point in more than a year.
Market participants are looking ahead to a Dec. 6 meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna. Saudi Arabia is expected to push for a production cut of up to 1.4 million bpd by OPEC and its allies.
Goldman Sachs said on Monday the G20 meeting this week could be a catalyst for a rebound in commodities prices, possibly prompting a thaw in U.S.-China trade tensions and offering greater clarity on a potential OPEC oil curb.
Goldman believes OPEC and other nations will come to an agreement, leading to a recovery in Brent prices.
“While we didn’t think that Brent prices were justified at $86 per barrel, neither do we believe that they are at $59 with our 2019 Brent forecast at $70,” Goldman said.