Investing.com - Oil seems to be on its last legs in the $50 area as the long roads to Buenos Aires and Vienna beckon.
Fed Chief Jerome Powell’s dovish speech knocked the dollar down and briefly sent crude prices higher on Wednesday, before a fresh bout of selling hammered U.S. West Texas Intermediate down 2% to a new 13-month low and within a dime of cracking its $50 per barrel support.
Oil could still rebound in the next session with traders girding for undue volatilty ahead of the G20 meeting in Buenos Aires on Friday -- where the U.S. and China could do a trade deal that boosts Beijing's demand for energy -- and next week's OPEC meeting where a production cut could reduce the perceived glut in crude supply.
"Otherwise, I see us going to the low $48 levels on WTI," said Tariq Zahir, managing member at Tyche Capital Advisors, an oil-focused fund in New York that argued earlier this year that oil in the high $70s and $80s was "simply overpriced".
WTI settled down $1.27, or 2.5%, at $50.29 per barrel. WTI is some 35% below four-year highs of nearly $77 a barrel hit in early October. The session low for Wednesday was $50.09, the lowest since Oct 2017.
U.K. Brent, the global benchmark for oil, fell $1.31, or 2.2%, to $59.09 at 3:30 PM ET (20:30 GMT). Brent has lost 32% since hitting four-year highs of around $87 early last month. On Friday, it fell for the first time below the $60 support that had been its perch since July 2017.
The latest selloff came after the Energy Information Administration said U.S. crude oil stockpiles rose by 3.58 million barrels last week vs. forecasts for a build of just 770,000 barrels. Inventories have grown by a staggering 56 million barrels over the past 10 weeks. At 450 million barrels in total, U.S. crude inventories are also at their highest level since the last Thanksgiving week.
The EIA report said gasoline stocks unexpectedly fell by 760,000 barrels vs. expectations for a 640,000-barrel build. But distillate stockpiles registered a surprise gain of 2.61 million barrels, compared to forecasts for a drop of 860,000.
Volality in oil has picked up ahead of the G20 on speculation whether President Donald Trump and his Chinese counterpart Xi Jinping will be able to strike a trade deal on the sidelines of the Buenos Aires meeting.
Trump, in an interview with The Wall Street Journal on Monday, said it was “highly unlikely” he would accept Beijing’s request to hold off on Washington’s plans to boost tariffs to 25% on some $200 billion of Chinese goods, due from Jan. 1.
A Bloomberg poll of analysts and a note by Goldman Sachs have meanwhile predicted that Saudi Arabia will push for a production cut at the enlarged OPEC+ meeting, which includes Russia, in Vienna next week, despite persistent tweets from Trump discouraging any cuts that lead to higher oil prices.