Oil recouped some of its early losses on Wednesday, echoing a modest recovery in global equities, but concern about the outlook for global growth and evidence of yet more crude supply kept gains in check.
The Organisation of the Petroleum Exporting Countries (OPEC), with partner countries such as Russia, meets on Thursday to discuss a potential cut in crude output.
In the face of a growing supply overhang, it will be keen to avert the kind of build-up in global oil inventories that sent prices on a 19-month long decline starting in late 2014.
After reaching a truce on trade over the weekend, the United States and China appeared once again to be at loggerheads after President Donald Trump threatened “major tariffs” on Chinese imports if the two failed to reach an effective deal.
Stock markets tumbled, taking cyclical assets such as oil with them, as the renewed tension rekindled fears of a global recession. Those concerns were reflected by a sharp drop in longer-term U.S. Treasury yields.
Brent crude futures LCOc1 were down 22 cents on the day at $61.86 a barrel by 1312 GMT, but above a session low of $60.80, while U.S. futures CLc1 had eased 6 cents to $53.19.
The oil price rallied by nearly 10 percent over Monday’s and Tuesday’s sessions, but has now retraced half of those gains.
“Oil sentiment is very fragile given clear event risk at play,” Harry Tchilinguirian, head of commodity strategy at BNP Paribas told the Reuters Global Oil Forum.
“The optimism that emerged following the G20 summit with some progress in U.S./China trade relations and the announcements of producer cooperation … gave way very quickly.”
Saudi Arabia produced a record 11.3 million barrels per day (bpd) of crude in November, according to a source familiar with the matter.
That marks a rise from October’s 10.65 million bpd, which, if confirmed, would mark the second-largest monthly increase since Reuters records began in 1997.
“OPEC’s will-they-or-won’t-they antics are keeping market players on the edge of their seats … there is a general consensus that the Saudis will have their work cut out to get Russia to significantly trim supply,” PVM Oil Associates said in a daily note.
An eleventh consecutive weekly build in U.S. crude inventories, the world’s largest and most visible, added to the pressure on the prices.
Official U.S. government oil production and inventory data is due later on Thursday, delayed by one day. A Reuters survey forecast a decline of 900,000 barrels.
Asian gasoline refining margins have fallen to their lowest in seven years, as have European margins, meaning that processing it has become a loss-making business, a worry for both oil investors and producers.
