Oil prices should finally break their record-breaking 12-day defeat on Wednesday morning, but analysts remain concerned that prices could fall below $ 50 a barrel.
At 8:20 ET, the price of West Texas Intermediate (WTI), the US benchmark for oil pricing, stood at $ 56.27 a barrel, up 1.04%, while Dated Brent crude, the international oil price benchmark, was up 1.3% $66.31 USD.
The price increases took place after a trading session on Tuesday, when oil lost up to 7% of its value and appears to be linked to a Reuters report stating that the OPEC cartel of oil producers and its partners is reducing oil production by up to 1.4 Millions of barrels discuss 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.
The decline on Tuesday, with both Brent and WTI dropping around 7%, was mainly driven by a tweet from US President Donald Trump calling on Saudi Arabia not to cut production. The tweet came in response to Saudi Arabian oil minister Khalid al-Falih, who said the kingdom was likely to reduce production by about 500,000 barrels.
The price of oil has plunged into a bear market that has fallen at least 20% below the highs seen in October amid growing inventory levels. At the beginning of November, the Trump government temporarily banned eight countries from sanctions against Iran aimed at cutting off Iranian oil from the rest of the world.
Data released by the Energy Information Agency last week showed that oil inventories in the US rose 5.8 million barrels by November 2, while production reached a weekly record of 11.6 million barrels a day.
The oil market has been under pressure from tensions and worries over rising interest rates since the beginning of October.
The prices can continue to fall. Erlam said he “wouldn’t be surprised to see” lower WTI prices to $50 a barrel and Brent to $60.
“It’s not too long ago that people were talking about the prospect of $100 a barrel oil but that now feels like a distant memory” he said.