International oil prices stabilise as OPEC production cut looms

File photo. Photograph:( Reuters )

Reuters New York, NY, USA Nov 21, 2018, 08.27 AM (IST)

US oil prices stabilised on Wednesday after slumping more than 6 per cent the previous day, with some support coming from a report of an unexpected drop in US commercial crude inventories.

But investors remained on edge, with the International Energy Agency (IEA) warning of unprecedented uncertainty in oil markets due to a difficult economic environment and political risk.

US West Texas Intermediate (WTI) crude futures were at $53.57 per barrel up 14 cents from their last settlement.

Front-month Brent crude oil futures had yet to trade.

Wednesday's more stable prices came following a report by the American Petroleum Institute on Tuesday that US commercial crude oil inventories had fallen unexpectedly by 1.5 million barrels, to 439.2 million barrels, in the week to November 16.

Yet the slight increase in WTI could not cover up general market weakness, with oil and stock markets both plunging the previous session.

"The global economy is still going through a very difficult time and is very fragile," IEA chief Fatih Birol said.

Fearing a glut like in 2014, when high global output and a slowdown in demand growth triggered a price crash, the Organization of the Petroleum Exporting Countries (OPEC) is pushing for a supply cut of between 1 million and 1.4 million barrels per day (bpd).

Despite the expectation of OPEC-led cuts, Brent and WTI prices have slumped by 28 and 30 per cent respectively since early October.

"Investors are becoming increasingly concerned that any potential production cuts by OPEC will be insufficient to cover the surplus in the market," ANZ bank said on Wednesday.

"The list of reasons for the decline are pretty specific ... too much supply and a risk of slowing demand growth," said James Mick, Energy Portfolio Manager with US investment firm Tortoise.

"Part of the supply issue has been surging US production," he added, referring to an output increase of almost a quarter in the United States to a record 11.7 million barrels per day (bpd).