Crude oil prices edged away from over two-month lows in early Thursday trading, after a sharp slide on concerns the market would take much longer than many anticipated to rebalance as supplies far outstrip demand.
Benchmark US crude futures were at $43.25 a barrel at 0242 GMT, up 32 cents from Wednesday when prices tumbled 3 percent on the back of high production, rising US stocks and an economic slowdown in Asia.
Internationally traded Brent crude futures were at $46.18 a barrel, up 37 cents following a 3.4-percent fall the previous day.
“Rising US inventories continue to remain a major theme driving crude oil prices … Iraq is also increasing pressure on US shale producers. Iraq has loaded around 10 tankers in recent weeks to deliver crude to US ports in November,” ANZ said on Thursday.
Trading data in Reuters showed there seemed to be shift in sentiment towards an expectation of lower oil prices, with 90,000 contracts having been sold down since the beginning of November, pulling open interest off a historic high, as traders sell out of oil.
At the same time, oil producers have hiked their short positions in Brent futures to record highs of almost 1.3 million in a sign that they are increasingly hedging their production in expectation of falling prices.
Beyond high production and brimming storage tanks, sentiment was also hit by a growing sense that the region’s two biggest economies were slowing sharply after China’s factory output growth eased further.
The slowdown in China has pulled down the entire commodity sector, with products like crude, copper, liquefied natural gas (LNG), coal and iron ore all down between 20 and 30 percent this year, on a re-based basis valued at 100 points on January 1.
Adding to demand worries are fears that Japan’s economy may have fallen into recession.
At the same time, emerging markets across the world are struggling with a soaring debt mountain that threatens growth.