Oil rebounded from recent losses on Wednesday, gaining more than 1 percent on perceptions that the price slide to 2017 lows prompted by economic worries has gone too far, too fast.
Crude has been caught up in wider financial market weakness as the US government shutdown, higher US interest rates and the US-China trade dispute unnerved investors and exacerbated worries over global growth.
Brent crude, the global benchmark, was up $1.51, or 3 percent, to $52 as of 11:00 a.m. EST (1600 GMT). It earlier fell to $49.93, lowest since July 2017, after a 6.2 percent slide in the previous session. U.S. crude was up gained $1.79, or 4.2 percent, to $44.31.
"I think there is a little bit of over-extension to the downside linked to global market fears," said Olivier Jakob, analyst at Petromatrix.
The head of Russian oil company Rosneft, Igor Sechin, predicted an oil price of $50-$53 in 2019, a long way south of the four-year high of $86 for Brent crude reached earlier this year.
Sechin, an ally of Russian President Vladimir Putin and a critic of OPEC, said the price slump was mostly linked to the US rate hike announced last week.
Wall Street initially opened higher, but stock markets pared gains amid ongoing weakness. Oil held onto its rally, however.
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 the oil market this year, with the average commodity trading adviser fund, or CTA, down by 7.1 percent on the year through mid-December, according to Credit Suisse data. Funds took big bets on oil's rally, only to see the commodity drop by more than 40 percent since highs reached in October.
While economic worries have weighed, the outlook is not as weak as in 2016 when a supply glut built up, because the Organization of the Petroleum Exporting Countries this time is trying to prop up the market, Jakob said.
Concerned about a new glut, OPEC and its allies including Russia decided earlier this month to cut production in 2019, unwinding a June decision to pump more oil. The combined group plans to lower output by 1.2 million bpd next year.
First Published: IST