RTRS: Oil rebounds to over $43 after 4 percent overnight fall
By Jennifer Tan
SINGAPORE (Reuters) - Oil rebounded by more than $1 a barrel to just above $43 in light bargain hunting on Wednesday, after having slumped 4 percent overnight on the back of lowered forecasts for U.S. energy demand and fears of a worsening global recession.
The market is looking ahead to producer cartel OPEC's December 17 meeting, which is expected to agree more output cuts to boost prices, and the release of the U.S. energy department's weekly inventory report later on Wednesday, which is likely to show rising crude stocks.
U.S. crude for January delivery was up $1.21 at $43.28 a barrel by 2:02 a.m. EST, off a session high of $43.49. On Tuesday, it fell $1.64, or 3.75 percent, to settle near a four-year low of $42.07 a barrel on Tuesday.
London Brent crude was up 82 cents at $42.35, off a session high of $42.75.
"After last night's fall, we could be seeing some bargain-hunting, but the volumes are not large. Overall, there are no bullish factors to push up prices right now," said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.
"The economic picture is weighing on the market, and the market is in waiting mode for next week's OPEC meeting."
Analysts expect oil prices to remain choppy, with a rising interest to buy on weakness.
"We may see some buying with participants positioning ahead of what could be a sharp supply cutback response by OPEC the following Wednesday, but any gain will be shortlived, with the focus squarely on deteriorating demand, rather than tightening supply," ANZ said in client note.
U.S. stocks sank on Tuesday as negative retail sales data, tepid home sales figures and profit warnings from firms sent investors scrambling for the exits, ending a two-day rally that had raised hopes the stock market may have hit a cyclical bottom.
Reinforcing the dire economic outlook, Japan sank further into recession in the third quarter, while fresh indicators from Britain and France underscored the growing economic contraction in Europe, and Canada declared itself in recession on Tuesday.
One positive bit of news amid the gloom was the tentative agreement reached by the White House and U.S. Congressional Democrats on the bailout of struggling U.S. auto makers.
Asian stocks rallied 3 percent to a one-month high on Wednesday as hopes rose that governments worldwide would step in to help ailing companies and spend their way out of the declines in growth.
In its monthly energy outlook, the U.S. Energy Information Administration (EIA) said it expected global oil demand to fall 50,000 barrels per day in 2008 and 450,000 bpd in 2009 -- marking the first drop in world oil demand year-to-year since 1983.
The lower forecast came as the EIA revised its 2009 world GDP growth estimate down to 0.5 percent from 1.8 percent last month.
The EIA's weekly inventory data due later on Wednesday could show that crude stocks rose 1.0 million barrels, according to an expanded poll of 13 analysts by Reuters.
"The bearish data from the EIA tonight could put some downward pressure on crude prices, but we do not expect any big moves," Hasegawa said.
Producer grouping OPEC, which has faced a slide of more than $100 a barrel in oil prices since July, has already agreed to cut about 2 million bpd of production to support prices, and members are leaning toward more supply cuts at the Algeria meeting.
OPEC kingpin Saudi Arabia, which has cited $75 a barrel as a "fair price" for oil, will make bigger supply cuts to some of its Asian and European customers next month, as it redoubles efforts to arrest the steep slide in prices.
"The market could be trading on some optimism that OPEC might agree to cut more than 2 million barrels per day at next week's meeting, but we don't think the rally is sustainable," Hasegawa added.
