Crude oil prices and commodity-related exchange traded funds popped Wednesday despite lingering concerns over rising production and a weakening global economy.
On Wednesday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, gained 1.6% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, increased 0.9%.
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Meanwhile, WTI crude oil futures rose 2.2% to $46.4 per barrel and Brent crude was up 1.9% to $54.8 per barrel on Wednesday.
“Given the high levels of price volatility we’ve witnessed over the last month, a $2 daily move isn’t really anything other than signs we continue to have price volatility,” Gene McGillian, vice president of market research for Tradition Energy, told Reuters.
Oil prices strengthened along with other risk assets, like U.S. equities, on Wednesday. However, weak manufacturing data from China added to ongoing concerns over a slowing global economy while increased output from large oil producers, such as Russia, also weighed.
China revealed factory activity fell for the first time in over two years in December, revealing the ongoing challenges Beijing faces in its scuffle with the U.S. over trade.
“The manufacturing survey data out of China this week is particularly negative for crude oil, as it goes to the heart of the key demand center for the market,” John Kilduff, a partner at Again Capital Management, told Reuters.
On the supply side, Russian production hit a post-Soviet record in 2018. Additionally, U.S. shale also pushed crude oil output to a record in October, and Iran raised exports in December as well.
While the Organization of Petroleum Exporting Countries and its allies, including Russia, have made plans to cut supply by 1.2 million barrels per day. U.S. oil production, which now outpaces all other major oil producing countries, has more or less negated the cartel’s plans. Nevertheless, energy minister for the United Arab Emirates remained optimistic that the market will stabilize in the first quarter.
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