Oil make small gain after 9% drop in two days as economic worries persist

Oil prices rebounded on Thursday – Brent crude up $1.22, or 1.6%, to $79.06 a barrel and US West Texas Intermediate crude futures $1.02, or 1.4%, to $73.86 – after posting the biggest two-day loss for the start of a year in three decades.

Big declines in the previous two days were driven by worries about a global recession, especially since short-term economic signs in the world’s two biggest oil consumers, the United States and China, looked weak.

European natural gas prices, which soared last year after Russia’s invasion of Ukraine, have now fallen well below their levels before the start of the war, reflecting the continent’s success rounding up alternatives to Russian gas, widespread conservation efforts and a relatively mild winter.

Meanwhile, wholesale natural gas prices in Europe sank to their lowest levels since November 2021 as mild winter weather reduced demand, erasing all the gains seen last year amid Russia’s invasion of Ukraine. The benchmark European contract — Dutch TTF gas future for the coming month — dropped 9.3 percent to 65.59 euros at around 1620 GMT, extending losses since the beginning of the week.

Helping drive the gains on Thursday was a statement from top US pipeline operator Colonial Pipeline, which said late on Wednesday its Line 3 had been shut for unscheduled maintenance with a restart expected on Jan. 7.

“This morning’s rebound is due to the shutdown of Line 3 of the Colonial pipeline,” said Tamas Varga of oil broker PVM. “There is no doubt that the prevailing trend is down; it is a bear market,” he added.

Both benchmarks’ cumulative declines of more than 9% on Tuesday and Wednesday were the biggest two-day losses at the start of a year since 1991.

On Wednesday, figures showing US manufacturing contracted further in December weighed on prices, as have concerns about economic disruption as COVID-19 works its way through China, which has abruptly dropped strict curbs on travel and activity.

Also weighing were inventory figures from the American Petroleum Institute, which according to market sources showed a rise in US crude and gasoline stocks. Official inventory data from the Energy Information Administration is out at 1530 GMT.

Global oil prices plunged on Wednesday over China demand concerns and European gas prices sank to their lowest levels since November 2021 as mild winter weather reduced demand.

Crude prices extended losses from a day earlier, diving around five per cent, over concern about demand in the world’s biggest oil importer China, amid a steep rise in Covid infections in the country.

At around 1600 GMT, a barrel of WTI for delivery in February was down 4.9% at $73.15 a barrel, and the main European contract, Brent for delivery in March, was 4.9% lower at $78.11.

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