(Bloomberg) -- Oil held steady near the lowest prices in more than a year as risk-off sentiment in broader markets undercut an OPEC+ agreement to pause its planned crude production increase for two months.
Global benchmark Brent was little changed $72.69, the lowest closing price since late June 2023, after earlier rallying more than 2% on news that the key coalition members won’t proceed with October’s scheduled hike of 180,000 barrels a day. Oil later pared those gains as falling equity prices weakened momentum for risk assets.
Crude’s recent plunge was exacerbated by trend-following algorithms, which pushed long positioning on oil markets to record lows. With commodity-trading adviser positions already at maximum-short capacity, market participants see today’s earlier gains as catalyzed by those buying the dip.
“It won’t take much to spark some CTA short-covering activity over the coming week, but the scale of buying activity is expected to be modest at best,” said Daniel Ghali, a commodity strategist at TD Securities. “This bodes well for a near-term bounce in prices, but downside pressures continue to grow in the medium-term.”
The OPEC+ decision to delay the crude supply increase comes after a steep drop in prices in recent weeks on weak economic data from top crude consumers China and the US. Libya has also taken a tentative step toward easing a deadlock that had halted much of the nation’s oil production.
Meanwhile in the US, oil markets are digesting official figures that showed crude inventories fell by 6.87 million barrels. The stockpile drawdown was on the higher side of expectations.
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--With assistance from Antonia Mufarech.
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