A pump jack operates in the Permian Basin oil production area near Wink, Texas. Image Credit: Reuters

London: Oil traded near its lowest closing level in 15 months as fears over slowing global economic growth compounded concerns that the market faces a supply glut in 2019.

Futures rose 0.8 per cent in New York after tumbling 12 per cent over the past three sessions, the biggest three-day slump since 2016.

Brent for February settlement advanced 0.6 per cent to $56.61 a barrel on London’s ICE Futures Europe exchange. Prices dropped 5.6 per cent to $56.26 on Tuesday, the lowest close since October 2017. The global benchmark crude traded at a $9.75 premium to WTI for the same month.

West Texas Intermediate for January delivery, which expires Wednesday, traded up 38 cents at $46.62 a barrel on the New York Mercantile Exchange at 12:14pm. London time. The contract closed down 7.3 per cent on Tuesday. Total volume traded Wednesday was about 30 per cent above the 100-day average. The more-active February contract rose 26 cents to $46.86.

Chinese President Xi Jinping showed little sign of backing down in a trade dispute with the US and the market braced for a Federal Reserve rate hike. Meanwhile, doubts persist over the effectiveness of output cuts pledged by the Opec+ coalition, even as Saudi Arabia expressed confidence in a long-term reduction.

“Concerns about oversupply and the slowing global economy seemingly grow by the day,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd in Zurich.

Crude has collapsed almost 40 per cent from a four-year high in early October, and is set for the worst quarterly decline since December 2014. After taking a battering over the past few sessions, US oil is in oversold territory for the first time since Nov. 30. Scepticism that the Organisation of Petroleum Exporting Countries and its allies won’t be able to prevent a glut in the face of surging American shale production and stockpiles has kept a lid on prices.

The industry-funded American Petroleum Institute was said to report that US crude inventories rose by 3.45 million barrels last week, adding to fears of an oversupply after a government report on Monday said shale output is set to expand. At the same time, Russian Energy Minister Alexander Novak said the country’s oil production is rising, though it’s preparing to implement reductions to conform with an accord between Opec and its allies.

The Opec+ alliance agreed earlier this month to remove 1.2 million barrels a day from the market in the first quarter of 2019 to revive prices. On Wednesday, Saudi Energy Minister Khalid Al Falih said he’s sure the deal will be extended in April.

While the US and China — the world’s two biggest economies — plan to hold meetings in January to negotiate a broader truce in their trade spat, a speech by Xi on Tuesday fuelled concerns over slowing growth as he pushed back against critics abroad, such as American President Donald Trump, and did not outline new policies that would stimulate the economy.

In the US, investors are bracing for Wednesday’s Federal Reserve policy decision against the backdrop of a recent rout in global markets, which has put equities on course for the worst year since 2008. While an interest-rate increase is widely expected, it’s rare for the central bank to hike during such market turmoil.