Oil prices edged up Thursday but remained in bear-market territory on lingering concerns about a global supply glut.
Light, sweet crude for August delivery settled up 21 cents, or 0.5%, at $42.74 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, gained 40 cents, or 0.9%, to $45.22 a barrel on ICE Futures Europe. The gains snap a three-session losing streak, but both contracts are still at their second-lowest settlement of the year.
A four-month descent into a bear market had put oil prices at their lowest price in more than 10 months on Wednesday. After a fall that far it is common for traders to pause, either from sellers closing out bets to lock in profits or just because there are few traders left willing to keep selling, according to analysts and brokers.
“If everybody already sold, who is left to sell?” said Bill Baruch, senior strategist at Chicago brokerage iTrader. “There’s nothing really out there that would say this market should go much higher, or hit new lows.”
There was little new information that would influence prices Thursday, and the day’s small rebound isn’t likely a sign of any turning point, analysts said. Few have reacted positively even to signs that might be construed as positive.
On Wednesday, U.S. oil prices dropped more than 2% to the lowest in 10 months after data from the Energy Information Administration showed a decline in U.S. crude and gasoline stockpiles last week. That wasn’t enough to change the minds of traders concerned the global supply glut isn’t declining fast enough.
“Sentiment on the oil market has become so gloomy that even news that would normally support prices is unable to spark any noticeable recovery, ” said Commerzbank analysts in a recent note. “A downward spiral has been set in motion.”
While the Organization of the Petroleum Exporting Countries and external producers such as Russia have cut global supply by about 2%, investors are concerned rising output in countries exempt from the deal, as well as nonparticipants including the U.S., has undercut the oil cartel’s efforts.
Recent data show U.S. shale producers churned out 9.35 million barrels last week, almost 8% higher than the same period last year.
While production growth rates showed signs of petering out, the data reaffirmed market fears U.S. producers have become more efficient to weather low prices.
Some analysts say global figures show supply is declining. The problem is that consumer appetite is weak and is declining faster, said Georgi Slavov, the head of research at Marex Spectron.
“It’s a broken market because everybody is focusing on supply but there is little attention paid to demand and it is poor,” he said.
Gasoline futures gained 2.4 cents, or 1.7%, to $1.4345 a gallon. Diesel futures gained 0.68 cent, or 0.5%, to $1.3716 a gallon.