Oil attempts rebound after worst day in a year

Investing.com - Crude prices rose cautiously Thursday as longs hammered in the previous session tried to cover some of their losses by buying in at the lower levels.

Short-covering by some bears closing out their positions for profit and bargain hunting by new buyers for oil at below $90 a barrel also helped prop a market that saw its worst plunge in a year on Wednesday for both U.S. West Texas Intermediate, or WTI, crude and London’s Brent oil.

In Asia’s morning session, WTI for delivery in November was up 31 cents, 0.4%, to $84.53 by 10:13 in Singapore (22:13 Eastern US). 

Brent for the most-active December contract was up 39 cents, or 0.5%, at $86.20. 

Oil prices finished the third quarter up almost 30% after a rally sustained more by fears of production cuts by OPEC than booming post-pandemic demand for energy. 

But as trading for October began this week, the market turned wobbly on mounting worries over the global economy and the impact the ramping dollar and US Treasury yields could have on international demand for oil denominated in the U.S. currency. 

On Wednesday, both WTI and Brent tumbled about 6% each for their sharpest one-day loss since September as those concerns came to a head — along with data showing the largest weekly build in almost two years for stockpiles of gasoline, the premier U.S. fuel product.

The plunge came despite oil producing alliance OPEC+ trying to reset the market with a positive outlook on demand issued at its monthly meeting.

OPEC+ is made up of the 13-member Saudi-led Organization of the Petroleum Exporting Countries and the 10 independent oil producers, including Russia. At Wednesday’s meeting, the alliance reaffirmed the joint Saudi-Russian pledge to continue removing at least 1.3 million barrels a day from the combined daily production of the two countries until the end of the year. 

OPEC+ let-down on 2024 cuts

But OPEC+ did not talk about extending those cuts into 2024, something the market had come to expect after Saudi braggadocio in recent months that it can continue surprising the trade with one production squeeze after another.

“Oil markets didn't like that,” Stephen Innes of SPI Asset Management said in a commentary that referred to the Saudi let-down on further tightening. “Demand destruction always plays a crucial role in eventually easing price pressures.” 

Worse, Innes said, was the impact of talk that global oil production could still grow in coming  months despite OPEC’s best efforts to fence in output.

“Increasing chatter about more non-OPEC supply coming to market is not working in the bull market's favour this week,” he added.