Investing.com -- Crude oil prices recovered to their highest level since Thursday, with a pickup in geopolitical risk premiums as the U.S. announced it would no longer protect anti-regime Kurdish rebels in northern Syria.
However, prices remained overshadowed by concerns for the health of the global economy, as well as by uncomfortable reminders of incremental supply increases around the world.
By 10:35 AM ET (1430 GMT), U.S. benchmark futures were up 1.7% at $53.72 a barrel, a modest bounce after falling from more than $62 a barrel in the immediate wake of the attacks on Saudi Arabian oil infrastructure last month. Saudi Arabia has since restored production to where it was before the attacks. The international benchmark Brent was up 1.7% at $59.35 a barrel.
The rebound has been capped by lingering fears for the strength of the world economy after a raft of bleak data from the U.S. and global manufacturing sector last week. The monthly U.S. labor market report reassured market participants somewhat that demand wasn’t falling off a cliff, but all the same, hedge funds cut their net long positions in crude to the lowest level in four weeks, according to data released on Friday by the Commodity Futures Trading Commission.
“Markets are projecting fear that global economic links are heading for a cardiac arrest triggering a global recession,” said Lena Komileva, managing director of G+ economics in London.
Both OPEC and the International Energy Agency have been steadily revising down their forecasts for oil demand growth since the summer, with the IEA’s most recent report warning that OPEC will have a tough time to keep the market in balance next year, given the prospects for steady growth in supply outside of the cartel.
Earlier Monday, Equinor (OL:EQNR) announced the first production from the giant new Norwegian field Johan Sverdrup two months ahead of schedule. Output from that field is due to ramp up to 440,000 barrels a day by next summer. And elsewhere, a study by Wood Mackenzie concluded that Exxon Mobil (NYSE:XOM) is well on track to hit its target of 1 million barrels a day of crude from the Permian shale basin by 2024.
Exxon has tripled its rigs in the Permian to 60 over the last year. By contrast, the overall number of drilling rigs across the U.S. continued its long decline last week, hitting a two-year low of 710.
Elsewhere, Gasoline Futures were up 1.8% at $1.5886 a gallon, while natural gas futures were down 1.9% at $2.3080 per 10,000 MM Btu.