SINGAPORE — Brent edged higher above $85 a barrel on Wednesday, recovering from its biggest daily fall in three years, a drop that pushed prices to the lowest since late 2010 as traders scrambled to keep up with the downward momentum.
Worry about oil supply exceeding demand in a slowing global economy sparked the rout that began after prices hit this year’s high in mid-June. Brent is down about $30 since then.
Comments from core Organisation of Petroleum Exporting Countries (Opec) members, including Saudi Arabia, Kuwait and Iran, signalling that the group is unlikely to cut output to support oil markets have further depressed prices.
Brent crude for November climbed 37c to $85.41 a barrel by 4.40am GMT. In the previous session, the front-month contract suffered its biggest daily drop since 2011 and slipped below $85 a barrel for the first time since late 2010.
US crude gained 27c to $82.11 after posting its largest fall in a single session in nearly two years.
“There is a very old and much-used cliche about standing under a falling knife which is exactly about this situation,” CMC Markets chief analyst Ric Spooner said.
“You’ve got very strong selling going on and until the market begins to show some signs of losing momentum, it’s safest to assume that the worst is yet to come.”
A break below price support levels could have fuelled more selling overnight as investors cut losses or took on short positions in anticipation of lower prices, Mr Spooner said.
Wall Street banks have scrambled this week to neutralise their exposure to big oil options trades, adding to the downward spiral.
Supply glut, weak demand growth
The International Energy Agency on Tuesday cut its demand growth forecast for oil in 2015 as global economies remain weak.
Iran has said that it can live with lower oil prices after similar signs from Saudi Arabia and Kuwait.
“A clear sort of signal coming in from statements of Opec members is that they are not likely to be defending the oil price at around these levels,” Mr Spooner said.
Shale oil output continued to rise in the US with production set to grow by about 106,000 barrels a day in November from October, projections from the US Energy Information Administration (EIA) showed on Tuesday.
US commercial crude oil inventories were forecast to have increased in the week ended October 10, while refined products probably fell, according to a Reuters poll of analysts.
Industry group the American Petroleum Institute (API) will issued its report later on Wednesday, and the EIA will follow with its weekly data on Thursday. The reports have been delayed a day due to the Monday’s Columbus Day US federal holiday.