Oil extended a slump to a fresh five-month low as mounting concerns over a long-anticipated supply glut outweighed broader financial market strength.
West Texas Intermediate eased to settle near $58 a barrel, the lowest since May. Prices fluctuated in choppy trade for much of the day after losing roughly 7% over the past five sessions.
While equities rebounded on the Federal Reserve signaling another rate cut later this month, oil remains under pressure after the OPEC+ alliance decided this year to return shuttered production faster than expected, adding to worries about a glut.
“Oil is still strongly influenced by trade tensions and shifts in risk sentiment, but with equity markets in positive territory there is some modest support,” UBS analyst Giovanni Staunovo said.
The International Energy Agency increased its estimate for record oversupply next year, and some oil-trading giants say the long-anticipated excess is already starting to emerge. Traders will also likely hone in on an industry report on US oil supplies due later Wednesday.
Key physical US crude grades have also weakened to the lowest in about two months as the trade spat between US and China escalated and sent shipping rates surging.
“WTI faces significant resistance around $60 a barrel, and headline risk surrounding US-China tensions remains elevated,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group.
The ongoing tit-for-tat between Beijing and Washington, the two biggest oil consumers, escalated this week, though US Trade Representative Jamieson Greer predicted the tensions would soon ease.
Some market metrics are also flashing softness. A closely watched timespread — the gap between the two nearest December contracts for WTI — has flipped into contango, a bearish structure where prices for supplies available near term is cheaper than deliveries further out.
Oil Prices
WTI for November fell 0.7% to settle at $58.27 a barrel in New York.
Brent for December settlement was 0.8% lower at $61.91 a barrel.
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