Oil prices are stabilizing, but worries about the glut of supply weigh on the public opinion

SINGAPORE (Reuters) – Oil prices stabilized on Thursday, reversing their earlier declines, but the market remains cautious, fearing an overabundance of supply in a sluggish economic climate.

Brent crude futures in the first month traded at $ 66.17 a barrel at 7:37 am GMT, up 5 cents from their last close.

The WTI (West Texas Intermediate) futures price was $ 56.29 per barrel, up 4 cents from their latest settlement.

Traders said the benchmarks had reversed earlier losses on signs that China and the US could take steps to defuse their bitter conflict.

Despite this, oil prices have lost about a quarter of their value since early October, with supply increasing as demand slows as the economy slows.

"The Asian refiners and consumers we are talking about are talking about initial concerns about slowing demand," said Mike Corley, president of Mercatus Energy Advisors.

US bank Morgan Stanley said Wednesday in a note that "China's economic situation has deteriorated significantly" in the third quarter of 2018, while analysts at Capital Economics said that "the short-term economic outlook of China were still mediocre. "

China is the world's largest importer of oil and the second largest consumer of crude oil.

At the same time, data released this week showed an economic contraction of industrial powers in Japan and Germany in the third quarter.

At the same time, supply has increased, notably due to a 22% increase in crude oil production in the United States this year, which reached a record 11.6 million barrels per day (bpd ).

"The producers … have more barrels than they can sell at the moment," said Corley of Mercatus Energy Advisors.

As a result, oil stocks are increasing. The American Petroleum Institute said Wednesday at the end of the week that crude stocks had risen 8.8 million barrels during the week, from 440.7 million barrels to 9 November, while analysts said expected an increase of 3.2 million barrels.

"With stocks likely to form in 1Q19, prices could remain under pressure in the short term," said Bernstein Energy analysts.

Cups to come?

Fearing a new overabundance, as in 2014, when prices fell under the weight of excess supply, the Organization of Petroleum Exporting Countries (OPEC) is currently discussing supply-side reduction.

To succeed, OPEC – under the de facto leadership of Saudi Arabia – will need Russia on its side, which is not a member of OPEC.

A joint effort by OPEC and Russia aimed at restricting supply from 2017 was one of the main factors behind the rise in crude oil prices last year and at the end of the year. first half of 2018.

"Russia, OPEC and Saudi Arabia are watching the market. If they find an imbalance between supply and demand, they (they) will of course take joint action to reduce the supply, "said Kirill Dmitriev, head of the Investment Fund. Russian direct, the country's sovereign investment agency.