Crude settled lower Wednesday amid continued builds in US crude supply and lingering uncertainty regarding OPEC's response to the recent selloff.
ICE January Brent settled $1.45 lower at $58.76/b and NYMEX January WTI was down $1.27 on the day at $50.29/b.
Rebounding refinery utilization and stepped-up export activity failed to blunt US crude stock growth, which extended for a 10th consecutive week, US Energy Information Administration data showed Wednesday.
Analysis: US crude stocks build for 10th week, defying expectations
Commercial crude supply grew 3.58 million barrels to 450.46 million barrels during the week-ended November 23, EIA data showed, pushing inventories to 6.7% above the five-year average.
Last week's build marks the longest streak of stock growth since fall 2015, which laid the groundwork for WTI prices crashing to more than 10-years lows at below $30/b in February 2016.
"There seems to be a mood in the market that this market is still negative," Price Futures Group senior markets analyst Phil Flynn said. "It was unable to latch on to the equities rally and really started to focus on the inventory build."
Oil prices fell sharply following the data release, but later recovered and were trading in positive territory around midday following a speech by Federal Reserve Chairman Jerome Powell. The speech sent equity markets soaring but weighed on US dollar futures, which were down around 1.25% around the market settle from levels just ahead of the speech. A weaker US dollar typically correlates with stronger oil prices.
Lingering uncertainty regarding OPEC's response to cratering oil prices also deflated markets in afternoon trading. While the market has been expecting OPEC to cut production following its December 6 meeting, so far the group has only given veiled signals of its intentions. Late on Wednesday, an official Saudi twitter account said Saudi Energy Minister Khalid Abdulaziz al-Falih and Nigerian Vice President Yemi Osinbajo agreed during a meeting in Abuja, Nigeria: "It is necessary to continue the mutual cooperation among OPEC members as well as external partners to take all necessary steps toward achieving balance and stability in the market."
"There is fear that OPEC is losing control of the market," Flynn said, adding: "$50/b is holding by a thread, it's kind of a line in the sand. [The market] is probably going to take out $50/b, and if it doesn't, then it could bottom, but if it does, it could open the floodgates as the next resistance is at $45/b."
Implied volatility for at-the-money January WTI puts was strong, trading around 58% on Wednesday, according to CQG data, suggesting significant downside risk remains. Active trading volume has led to a sharp rise in open interest for the NYMEX $40, $45, and $50 January puts over the past week. The MarketView data shows open interest for the January $40 put was up to 14,395 contracts on Tuesday, while open interest for the January $45 put moved to 10,261 contracts and the January $50 put was at 13,659 contracts. Open interest data is delayed one day.
Products futures also settled lower on Wednesday. NYMEX December ULSD was down 4.76 cents at $1.8384/gal and NYMEX December RBOB settled 2.29 cents lower at $1.3979/gal.
