- Oil prices look set to break their record losing streak, with both major benchmarks trading higher on Wednesday.
- Before Wednesday’s rally, prices dropped for 12 consecutive days.
- Prices dropped as much as 7% on Tuesday after US President Donald Trump again pushed back against Saudi Arabia’s plans to increase production.
- Despite the rebound, analysts fear that the price of oil could fall below $US50 a barrel.
- You can track oil prices live at Markets Insider.
Oil prices looked set to finally break their record breaking 12-day losing streak on Wednesday morning, but analysts remain concerned that prices could drop below $US50 a barrel.
By about 8:20 a.m. ET, the price of West Texas Intermediate, the US benchmark, was trading at $US56.27 a barrel, a gain of 1.04%, while Brent crude, the international benchmark, was up 1.3% at $US66.31.
The price increases came after a trading session on Tuesday when oil lost as much as 7% of its value and seem related to a report from Reuters that the OPEC cartel of oil producers and its partners were discussing cutting oil output by up to 1.4 million barrels a day.
“It’s been a perfect storm for oil as of late, with lower global growth expectations, higher output from the US, Russia and Saudi Arabia, waivers on Iranian sanctions and general risk aversion in the markets sending Brent and WTI rapidly into bear market territory,” Craig Erlam, a senior market analyst at Oanda, said on Wednesday.
Tuesday’s drop, which saw both Brent and WTI fall by about 7%, was driven largely by a tweet from US President Donald Trump urging Saudi Arabia not to cut production. The tweet came in response to Khalid al-Falih, Saudi Arabia’s oil minister, saying the kingdom was likely to cut production by about 500,000 barrels.
Oil prices have tumbled into a bear market – down at least 20% from their October peaks – amid concerns of growing stockpiles. Earlier in November, the Trump administration granted eight countries temporary waivers from the sanctions it placed on Iran that were designed to cut off Iran’s oil from the rest of the world.
Data released last week by the Energy Information Agency showed US oil inventories climbed by 5.8 million barrels in the week to November 2, while production hit a weekly record of 11.6 million barrels a day.
The oil market had already been under pressure since the beginning of October amid trade tensions and concerns over rising interest rates.
Prices may well have further to fall. Erlam said he “wouldn’t be surprised to see” prices for WTI to slip to $US50 a barrel, and Brent to $US60.
“It’s not too long ago that people were talking about the prospect of $US100 a barrel oil but that now feels like a distant memory,” he said.
The chart below illustrates the drop in WTI oil prices seen since its peak in October: