Tuesday’s recovery in global equities eased some pressure on oil, but the U.S. stock market turned negative around midday. Crude futures pared gains as stocks fell.
Brent crude oil futures ended Tuesday’s session 23 cents higher at $60.20 a barrel, off a session high of $61.10. U.S. crude futures rose 65 cents, or 1.3 percent, to $51.65 a barrel, after earlier rising more than 2 percent to $52.43.
“The dollar is a bit weaker, but other than that, I don’t see any reason why this market should rally right now. It fell quite hard yesterday, so it might correct higher,” PVM Oil Associates Tamas Varga said.
Global stocks have fallen by more than 5 percent so far this month on worries about the impact of a U.S. trade dispute with China on economic growth. Any slowdown would hurt oil demand.
A further boost came from a shutdown in production in Libya, where the National Oil Company (NOC) declared force majeure on Monday on exports from the El Sharara oilfield, the country’s biggest, which was seized last weekend by a militia group.
NOC said the shutdown would result in a production loss of 315,000 barrels per day, and an additional loss of 73,000 bpd at the El Feel oilfield.
To shore up oil prices which have tumbled by 30 percent since a peak above $86 in October, OPEC, Russia and their allies agreed last week to cut output by a joint 1.2 million bpd from January.
Russia said on Tuesday it plans to cut its oil output by 50,000 to 60,000 bpd in January, as part of a gradual means of meeting its commitment under the deal to cut by 220,000 bpd.
Analysts and investors are not yet convinced that the supply cut will be effective in warding off a repeat of 2014, when rapidly rising global production overtook growth in demand and led to a huge overhang of unwanted fuel.
“There remains a lot of uncertainty if the production cut is thick enough to make a significant dent in global supply,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
In a show of no confidence, money managers have cut their bullish holdings of Brent and WTI crude futures and options to the lowest level in three years this month.
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