Oil retreats again after recovering from pre-holiday sell-off

LONDON (Bloomberg) -- Oil slumped again in New York, just after recovering from a pre-Christmas plunge, amid ongoing concern about the global economy.

West Texas Intermediate futures retreated 1.5% after surging 8.7% on Wednesday. A rebound in equities also faltered. There was turbulent trading in crude amid low holiday volumes, with prices slumping to an 18-month low on Dec. 24 before posting their biggest rally in two years on Dec. 26.

Oil is on track for about a 25% decline this year on fears that the ongoing trade dispute between the U.S. and China will tip the global economy into recession, crimping fuel demand just as a new wave of American shale oil hits the market. The losses are being limited by planned production cuts by the Organization of Petroleum Exporting Countries and its allies, an alliance known as OPEC+.

“It remains difficult to hold strong views on markets when so many participants are on holiday and equity markets are so volatile,” said Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland.

WTI for February delivery fell 67 cents to $45.55/bbl on the New York Mercantile Exchange at 1:49 p.m. in London. The contract advanced $3.69 on Wednesday after tumbling by $3.06 on Dec. 24. Total volume traded on Thursday was about 8% above the 100-day average.

Brent for February settlement dropped 90 cents to $53.57/bbl on London’s ICE Futures Europe exchange, after rising $4 on Wednesday. The global benchmark crude traded at an $8.01 premium to WTI.

Oil jumped on Wednesday as all three major U.S. stock indexes gained at least 4%, a feat last achieved in 2011. President Donald Trump had said an equity rout that pulled the S&P 500 Index down about 20% from a record offered a “tremendous opportunity to buy.” Additionally, a White House official assured investors that Federal Reserve Chairman Jerome Powell won’t be fired, an action Bloomberg News reported that Trump had discussed.

There are some signs the U.S. and China may be making progress to resolve their trade conflict. A delegation led by Deputy U.S. Trade Representative Jeffrey Gerrish is said to plan visiting China in early January for the first face-to-face discussion since the two countries agreed to a truce. That follows China’s announcement of another round of tariff cuts earlier this week.

“Hopes of U.S.-China trade progress impacted equity and crude markets” even though it’s a small step in the negotiation process, said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp. “As trading volumes are thin, crude prices could continue to be volatile and react to every little thing through early January.”

Meanwhile, U.S. crude inventories probably fell 3 MMbbl last week, according to a Bloomberg survey of analysts. If Energy Information Administration data due Friday shows a similar move, it will be a fourth consecutive weekly decline in U.S. stockpiles.