Halfaya oilfield
A worker is seen at the new CPF3 oil station in the Halfaya oilfield in southern of Maysan province, Halfaya, Iraq. Image Credit: REUTERS

LONDON: Oil rose to around $51 a barrel on Wednesday on perceptions that a price slide to 2017 lows prompted by economic worries had been overdone amid an Opec-led effort to tighten supply.

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 60 cents at $51.07 at 1415 GMT. It earlier fell to $49.93, the lowest since July 2017, and posted a 6.2 per cent slide in the previous session. US crude was up 75 cents at $43.28.

“I think there is a little bit of over-extension to the downside linked to global market fears,” said Olivier Jakob, analyst at Petromatrix. “It’s all about equities.” “Opec has shown it wants higher prices and is working towards that goal.” Still, 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 was set for a higher opening, potentially lending oil some support. Asian stocks retreated on Wednesday while markets in Britain, Germany and France remained closed for Christmas holidays.

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 that a new glut could take shape, Opec and its allies including Russia decided earlier this month to return to a policy of cutting production in 2019, unwinding a decision taken in June 2018 to pump more oil.

The producers’ alliance, known as Opec+, plans to lower output by 1.2 million barrels per day, of which Opec’s share is 800,000 bpd, next year, and some ministers have even suggested taking further action.

Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said some buying interest had returned.

But, he added, economic worries will continue to weigh unless Opec reassures the market as to the viability of the supply cuts and “even imposes deeper ones as some members have suggested”.