Oil prices try to steady after 12th straight drop

U.S. oil prices wavered early Wednesday as investors continued to wrestle with rising crude supplies against lingering questions about demand.

West Texas Intermediate oil for December delivery

CLZ8, +1.24%

 rose 23 cents, or 0.4%, at $55.91 a barrel, after settling Tuesday at $55.69 on the New York Mercantile Exchange. That was the lowest front-month contract finish since Nov. 16, 2017, and biggest one-day percentage decline, at over 7%, in more than three years, according to Dow Jones Market Data.

Global benchmark Brent crude is now down about 24% from its peak in October, with January Brent

LCOF9, +1.31%

last up 83 cents, or 1.3%, at $66.30 a barrel. The contract tumbled $4.65, or 6.6%, to settle at $65.47 a barrel on ICE Futures Europe Tuesday, officially joining its U.S. counterpart in a bear market, defined as at least a 20% pullback from a recent high.

More signs of strong supply data may drive price action as the U.S., Russia and Saudi Arabia are pumping crude at record levels, causing global supply to significantly outrun demand, a monthly update from the International Energy Agency showed Wednesday.

Read: Oil futures just did something never done before, as Trump calls for lower crude prices

IEA also said crude output from the world’s three biggest producers is holding global supply steady, at around 100.7 million barrels a day last month. That’s 2.6 million barrels a day higher than the same period last year.

Some analysts think oil’s move has been too dramatic in a short period, with a still-unfolding production picture.

“While the macro demand concerns from October were likely overdone, the forward supply fundamental picture has substantially deteriorated with large upward revisions in U.S. production and stronger-than-expected Libyan and Venezuelan output. Importantly, though, this has yet to materialize in sharply rising inventories and does not justify the magnitude of today’s sell off, especially if OPEC is now discussing a production cut as a result,” said Jeffrey Currie and the commodities team at Goldman Sachs, in a note.

Since May, global oil output has climbed by 1.8 million barrels a day. The U.S. has provided 1 million barrels a day of growth and Saudi Arabia and Russia added 620,000 barrels a day and 445,000 barrels a day, respectively, the agency said.

Read: 5 reasons oil prices are in a history-setting tailspin

Earlier this week, in its annual World Energy Outlook, the IEA said its main projection scenario through to 2040 foresees the U.S. accounting for nearly 75% and 40% of global oil and gas growth, respectively, over the next six years. Growth is expected to be driven primarily by shale fracking. U.S. shale oil supply is expected to more than double, reaching 9.2 million barrels a day by the mid-2020s, the agency said.

A supply build has driven the market’s down move, as has weakening global economic growth and the decision by the Trump administration to grant waivers to major buyers of Iranian crude following the enactment of sanctions, a factor that had been expected to keep most Iranian oil off the market.

The price drop prompted the Organization of the Petroleum Exporting Countries and its allies, including Russia, to signal on Sunday that it could enact a joint production cut. Such a move would come just months after the group decided to ramp up production after more than a year of holding back output.

Plus, President Donald Trump has been consistently advocating for lower oil prices and on Monday issued another tweet urging for even lower prices.

Looking ahead, weekly petroleum supply data from the EIA will be released Thursday, a day later than usual due to Monday’s Veterans Day holiday. Analysts polled by S&P Global Platts expect the government agency to report a rise of 2.3 million barrels in crude stockpiles for the week ended Nov. 9. That would mark an eighth straight weekly climb.

Natural-gas prices

NGZ18, +11.22%

meanwhile, remain in focus. They finished at the highest for a front-month contract since November 2014, according to Dow Jones Market data, with the December contract up 8.3% to $4.101 per million British thermal units, as traders fretted over tight supplies and cold weather.

Read: Natural gas rallies to highest finish in nearly 2 years

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