Oil bounces above $63 after slide, but glut worries persist

Oil bounced above $63 a barrel on Wednesday to claw back some of the previous day’s 6 percent plunge, lifted by a report of an unexpected decline in US crude inventories.

The American Petroleum Institute (API) said on Tuesday that US crude inventories last week fell by 1.5 million barrels, easing concerns for now that a supply glut is building up.

“The move yesterday was extremely sharp; after such moves you expect to have some rebound,” said Olivier Jakob, analyst at Petromatrix. “The API reported a stock draw - it is not a big one but at least it’s not a 10-million-barrel build.”

Brent crude, the global benchmark, was up 92 cents to $63.45 per barrel at 0944 GMT and traded as high as $63.67. US crude gained 98 cents to $54.41.

Yet Wednesday’s bounce did little to reverse overall market weakness. Crude fell more than 6 percent in the previous session and world equities tumbled as investors grew more worried about economic growth prospects.

25 percent fall in Brent

Brent has fallen by more than 25 percent since reaching a 4-year high of $86.74 on October 3, reflecting concern about forecasts of slowing demand in 2019 and record supply from Saudi Arabia, Russia and the United States.

Worried by the prospect of a new supply glut, the Organization of the Petroleum Exporting Countries is talking about a U-turn just months after increasing production.

OPEC, plus Russia and other non-OPEC producers, is considering a supply cut of between 1 million barrels per day (bpd) and 1.4 million bpd at a December 6 meeting, sources familiar with the issue have said.