15 October 2014, News Wires – Brent edged higher above $85 per barrel on Wednesday, recovering from its biggest daily fall in three years, a drop that pushed prices to the lowest since late 2010 as traders scrambled to keep up with the downward momentum.
Worries about oil supply exceeding demand in a slowing global economy sparked the rout that began after prices hit this year’s high in mid-June. Brent is down about $30 since then.
Comments from core OPEC members, including Saudi Arabia, Kuwait and Iran, signaling that the group is unlikely to cut output to support oil markets have further depressed prices.
Brent crude for November climbed $0.37 to $85.41 per barrel by Wednesday morning. In the previous session, the front-month contract suffered its biggest daily drop since 2011 and slipped below $85 per barrel for the first time since late 2010.
US crude gained $0.27 to $82.11 after posting its largest fall in a single session in nearly two years.
“There is a very old and much-used cliche about standing under a falling knife which is exactly about this situation,” CMC Markets chief analyst Ric Spooner told Reuters.
“You’ve got very strong selling going on and until the market begins to show some signs of losing momentum, it’s safest to assume that the worst is yet to come.”
A break below price support levels may have fuelled more selling overnight as investors cut losses or took on short positions in anticipation of lower prices, Spooner said.
Wall Street banks have scrambled this week to neutralise their exposure to big oil options trades, adding to the downward spiral.
The International Energy Agency on Tuesday cut its demand growth forecast for oil in 2015 as global economies remain weak.
Iran has said that that it can live with lower oil prices after similar signs from Saudi Arabia and Kuwait.
“A clear sort of signal coming in from statements of OPEC members is that they are not likely to be defending the oil price at around these levels,” Spooner said.
Shale oil output continued to rise in the United States with production set to grow by some 106,000 barrels per day in November from this month, projections from the US Energy Information Administration showed on Tuesday.
US commercial crude oil inventories were forecast to have increased in the week ended 10 October, while refined products likely fell, according to a Reuters poll of analysts.
Industry group the American Petroleum Institute will issued its report later on Wednesday, and the EIA will follow with its weekly data on Thursday.