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Both U.S. and Brent crude were about 8 percent higher on Wednesday, but it was unclear if the move would see any follow-through when trading desks are more fully staffed after the beginning of the new year.
Crude has been caught up in wider financial market weakness as the U.S. government shutdown, higher U.S. interest rates and the U.S.-China trade dispute unnerved investors and exacerbated worries over global growth.
“The market is still really concerned about demand,” said Bernadette Johnson, vice president in market intelligence at DrillingInfo in Denver. The sell-off “doesn’t signal strength of confidence in demand, but we still went too far too quick. We still believe $45 is too low.”
Brent crude oil futures, the global benchmark, rose $4, or 7.9 percent, to $54.47. It earlier fell to $49.93, the lowest since July 2017, and posted a 6.2-percent slide in the previous session.
Recent selling “has felt less fundamentally driven and more a function of the overall market meltdown as increased equity volatility and growing macro concerns have weighed on a number of asset classes,” wrote analysts at Tudor, Pickering & Holt.
Funds have incurred heavy losses in oil markets this year, with the average commodity trading adviser fund, or CTA, down by 7.1 percent on the year through mid-December, according to Credit Suisse data. Funds took big bets on oil’s rally, only to see the commodity drop by more than 40 percent since the October highs.
The head of Russian oil company Rosneft, Igor Sechin, predicted an oil price of $50-$53 in 2019, a long way south of the four-year high of $86 for Brent crude reached earlier this year.
Still, oil’s outlook is not as weak as in 2016 when a supply glut built up, because OPEC this time is trying to prop up the market, said Olivier Jakob, analyst at Petromatrix.
OPEC’s share is 800,000 bpd, next year, and some ministers have even suggested taking further action.
Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said some buying interest had returned after firmer trading in U.S. equity futures on Wednesday.
But, he added, economic worries will continue to weigh unless OPEC reassures the market as to the viability of the supply cuts and “even imposes deeper ones as some members have suggested.”
— CNBC’s Tom DiChristopher contributed to this report.