Oil trades near two-month low as drillers return rigs amid glut

It pointed out in a commentary that the global market remains oversupplied, crude inventories in developed countries are at record levels and there is no direct threat to Middle East oil facilities and transit points. Oil is priced in dollars and becomes more expensive for holders of other currencies as the greenback appreciates.

Futures of Brent crude were up over $1.05 Wednesday after settling 99 cents lower on Tuesday.

At around 0600 GMT, USA benchmark West Texas Intermediate (WTI) for delivery in December was down six cents to US$41.68, reversing gains in the morning.

“We expect that inventories will build counter-seasonally (stocks usually fall in winter) in 4Q15 and that the market will remain oversupplied through 1H16”, it added.

Crude oil rebounded a bit in the Asian session as traders took advantage of low prices to purchase the commodity.

In its annual World Energy Outlook released earlier this week the IEA forecast that a sluggish recovery in demand and a fall in supply would produce an energy price of $80 a barrel by 2020.

Wednesday’s rally may be short-lived, however, as broader economic concerns linger.

Global oil stocks have climbed further as supply continues to outpace demand.

“Surprisingly, US drillers are putting rigs back to work in the oil fields after more than two months”, ANZ bank said on Monday, citing the addition of two rigs to Baker Hughes’ USA oil rig count.

Traders said the higher prices were largely a matter of sentiment, with a premium being factored in following France’s large-scale air strikes against Islamic State in Syria in response to the attacks in Paris.

Supplies of distillate fuel, the category that includes diesel and heating oil, fell 791,000 barrels to 140.3 million, leaving stockpiles 22 percent higher than at the same time a year ago.

The US more than doubled its imports of oil from Iraq between August and September, according to a Platt’s analysis of U.S. Energy Information Administration statistics. In early Monday trade, WTI sank sharply for a short period to test the $40 line, but buyers jumped in and reversed the trend.

“This massive cushion has inflated even as the global oil market adjusts to $50 per barrel”.

Weakness in Asia’s two biggest economies, China and Japan, is also weighing on prices.