Oil prices edge away from two-month lows but outlook remains bleak

Traders also seem to be positioning for cheap oil well into next year, with the number of options to sell at $30 a barrel in March 2016 jumping from virtually zero before August to nearly 12,000. The traded Bloomberg Commodity Index fell below 83 points this week to level not seen since 1999, and it is down 40 per cent since the oil rout began past year.

“The substantial crude oil inventory rise is a definitive negative for the market and prices, but strong demand for gasoline and a large rise in distillate demand is a silver lining for market bulls”, said John Kilduff, partner at NY energy hedge fund Again Capital.

Still, the IEA predicts that supplies outside Opec will decline next year by the most since 1992 as low crude prices take their toll on the USA shale oil industry.

Venezuelan President Nicolas Maduro used the summit to push his idea of convening a meeting of world oil producers that could revive sub-$50 a barrel prices that have walloped the Venezuelan economy.

World oil prices rose on Friday, rebounding slightly from the previous day’s sharp losses, after the global Energy Agency forecast sustained demand.

Precious metals also continued lower, with the COMEX gold futures contract down 0.57% or $6.20 at $1,078.70 an ounce, while spot gold was 0.62% or $6.72 lower at $1,079.54 an ounce.

“We have not seen supply response yet, especially among non-OPEC nations, and as a result there is still a supply-demand disconnect and we’re seeing that reflected in record-high inventory levels” Pelletier said. “It has also provided a challenging market environment for a few higher-cost crude oil production, which has already shown a slowdown”.

American Petroleum Institute’s (API) weekly report showed inventory surplus by 6.3 million barrels.

Iraq is OPEC’s No. 2 crude producer. Saudi Arabia, along with a few other OPEC members, have delivered cuts to their official selling prices to buyers in Europe and the United States in their quest to for market share, particularly as consumption in Asian hot spots such as China appears to be moderating.

While shale-oil production in the US has started to decline because of lower spending on new wells, increased drilling efficiency and higher Gulf of Mexico output have kept the country’s production relatively robust.