Stock Market Weakness Weighing on Crude Prices

Oil's Stormy Quarter Draws to Close With Biggest Loss Since 2014

Stock Market Weakness Weighing on Crude Prices

Brent settled up 59 cents, or 1.1 percent, at $53.80 a barrel, while WTI settled 8 cents higher at $45.41 a barrel.

OPEC and its partners including Russian Federation responded to the downturn earlier this month with a promise to cut 1.2 million barrels a day of output starting January.

Brent crude, seen as a global benchmark for oil prices, rose by nearly a third between January and October, to a high of $86.74 per barrel.

While a gentle recovery is expected for prices in the first quarter 2019, the market might still remain under pressure from swelling production in the United States, which has emerged as the world's biggest crude producer this year.

Factory activity weakened in December across Asia, including in China, as the Sino-U.S. trade war and a slowdown in Chinese demand hit production in most economies, pointing to a rocky start for the world's top economic growth region in 2019.

U.S. West Texas Intermediate (WTI) crude ended $1.13, or 2.5 per cent, higher at $46.54 a barrel, after hitting a session low at $44.35 and high at $47.78.

However, many US producers need oil prices in the $50-$55 range to break even on the cost of new wells, which is forcing some energy companies to tap the breaks, said Neal Dingmann, oil equity analyst at Suntrust Robinson Humphrey. Renewed US sanctions against major producer Iran, as well as healthy economic conditions and concerns about crude supplies, had elevated prices until October.

"The omens are far from encouraging", said Stephen Brennock of oil broker PVM, citing rising non-OPEC supply and the likelihood of further increases in oil inventories.

Oil jumped to a four-year high in early October on concern that renewed US sanctions on Iran's oil exports would tighten supply.

But North American producers will likely begin to reduce spending on drilling in 2019 as prices fall below break-even levels for new wells in the Permian Basin and the Eagle Ford shale field in Texas, analysts said. "Do you think it's just luck that gas prices are so low, and falling?"

"We expect USA (companies) will increase shale oil production continuously over the next year", said Adrià Morron Salmeron, economist at CaixaBank Research.

Trump, meanwhile, kept up his campaign to push prices down, boasting in a tweet Tuesday about low gasoline prices that he likened to a tax cut for consumers.

Independent market analyst Greg McKenna said in a note on Wednesday that it was "difficult for traders and investors to ignore what looks like a genuine global economic slowdown".

The loss is sequel to the Organisation of Petroleum Exporting Countries (OPEC) decision to cut the country's production quota from January 1, 2019.

"For the immediate future, in the absence of anything new, the first pressure point for oil markets would come around May 2019 or a month or so earlier when the "extensions of (Iran) waivers" would be discussed". Worldwide trade disputes and interest rate hikes in the USA have added to the downdraft facing oil.

On the production side, all eyes will be on the ongoing surge in USA output and on OPEC's and Russia's supply discipline.

This story has been published from a wire agency feed without modifications to the text.

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