As oil prices surged and demand plummeted, investors were on the forefront, so the oil market was struggling to settle down on Wednesday after falling 7 percent from the previous day.
Photo: Oil was leaked from Edwin Drake's first oilfield, which started the modern oil industry at Drake Well Museum and Park in Titusville, Pennsylvania, on October 5, 1975. REUTERS / Brendan McDermid / File Photo
US West Texas Intermediate crude oil futures fell 15 cents to $ 55.54 a barrel on Jan. 1.
International benchmark Brent crude oil futures LCOc1 rose 4 cents to $ 65.51 a barrel.
The market fell more than 7% from the previous day. Crude oil lost more than a quarter of its value in early October, one of the biggest falls since the price collapsed in 2014.
The plunge in spot prices reversed the forward curve for crude oil.
The September spot price was significantly higher than later deliveries, a structure known as backward work, suggesting that the market is narrow because it is not good to put oil in storage.
By mid-November, the curve was changed to Congo Tango. Crude oil prices for immediate delivery were cheaper than those sent later. It means an oversupply market because it is attractive to store oil for later sale.
The oil market is under pressure from both supply surges and concerns about the recession.
The US Department of Energy (EIA) predicted in December that US crude oil production in seven major shale waters would reach 794 million barrels per day (bpd).
With the surge in land production, US crude oil production C-OUT-T-EIA reached 11.6 million barrels, making the United States the world's largest producer of crude oil, outpacing Russia and Saudi Arabia.
Most analysts expect US production to exceed 12 million barrels in the first half of 2019.
"This, in our view, will offset any upward pressure that is higher than $ 85 per barrel (for oil)," said Jon Andersson, head of materials at Vontobel Asset Management.
The surge in American production is contributing to the increase in stockpile.
The US Petroleum Institute's industry group data released on Tuesday showed that the week ended Nov. 2 saw an increase in US crude inventories of 43.8 million barrels to 7.8 million barrels as refinery production declined.
OPEC producers cartel are concerned about supply and price collapse.
OPEC has issued a frequent public statement that it will start withholding crude oil imports in 2019 to boost supplies and raise prices.
"OPEC and Russia are under pressure to reduce their current level of production," Anderson said, "which is the decision we expect to take at the next OPEC meeting on December 6th.
This puts OPEC in the process of clashing with US President Donald Trump, who publicly supported low oil prices and called on OPEC to halt production.
Henning Gloystein's report; Edited by Joseph Radford