Oil ETFs Continue to Fall Off on Rising Supply Concerns

Oil ETFs Continue to Fall Off on Rising Supply Concerns

The value of a WTI crude futures contract for February delivery on the New York Mercantile Exchange (NYMEX) rose by $3.69, to $46.22 a barrel.

Oil has plunged more than 40% from a four-year high in October on the prospect of a supply glut. At the same time, President Donald J. Trump's trade war with China and the Federal Reserve's policy on interest rates have clouded the outlook for global economic growth.

"The market is still really concerned about demand", said Bernadette Johnson, vice-president in market intelligence at DrillingInfo in Denver. "We still believe US$45 is too low". They jumped 8.7 percent to $46.22 per barrel in the previous session.

Brent crude LCOc1, the global benchmark, was up 43 cents at $50.90 at 0949 GMT.

"The recent weakness in the physical Brent structure can be attributed to a broader easing of purchases by Asian refiners at this point, with lower-end-Q1 intake weighing on spot assessments, and we can expect this pressure to carry through over the coming weeks", consultancy JBC Energy said in a report. It earlier fell to US$49.93, the lowest since July 2017.

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The IG Client Sentiment Report still shows83.1% of traders are still net-long crude compared to 85.9% last week, with the ratio of traders long to short at 4.91 to 1.

Recent selling in oil "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 in a morning comment.

Funds have incurred heavy losses in oil markets this year, with the average commodity trading adviser fund, or CTA, down by 7.1 per cent on the year through mid-December, according to Credit Suisse data.

After a turbulent eight weeks, during which crude oil lost almost 30 percent of its value, a last minute deal between countries of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC countries to cut production is expected to lend some stability to the market.

Anxious that another overabundance could frame, OPEC and its partners including Russian Federation chose not long ago to come back to an approach of cutting generation in 2019, loosening up a choice taken in June 2018 to siphon more oil.

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