By Barani Krishnan
Investing.com - Oil tried to rebound on Thursday from a two-day slide but settled mixed as supplies again looked plentiful from Saudi Arabia’s return to full production. Worries about Donald Trump’s future also weighed, as an impeachment inquiry hung over the president.
U.S. crude futures ended slightly lower while U.K.’s Brent oil rose modestly after Saudi Arabia said its oil production was up and fully running, having recovered from the Sept. 14 attack on its energy facilities.
A formal impeachment inquiry into President Donald Trump also curbed risk appetite. After days of pressure by Democrats, the White House released a reconstructed transcript of a call between the president and his Ukrainian counterpart, where Trump is heard asking a “favor” before discussing a corruption probe in the East European nation that links to his political rival Joe Biden.
U.S. West Texas Intermediate crude settled down 8 cents at $56.41 per barrel.
U.K. Brent oil closed up 35 cents at $62.74.
Oil jumped as much as $8 a barrel, or nearly 15%, right after the Saudi attack, which briefly disrupted about 5% of daily global crude production.
Since then, the market has given back about $6 of those gains on swift Saudi recovery efforts from the attack. On Wednesday, oil also fell after a surprise jump in the weekly reading for U.S. crude stockpiles.
Industry experts and veterans had initially thought it would take many weeks, even months, for Saudi Arabia to regain full output at its damaged Abqaiq crude processing plant, which turned out 5.7 million barrels per day (bpd) before the attack. There were also fears that Riyadh and the United States might launch a military offensive against Iran, which they accused of carrying out the attack but has denied the charge.
The speculation has come to nought, with Saudi Arabia saying on Wednesday it now had a higher oil production capacity, at more than 11 million bpd. The kingdom and the U.S. have also softened their stance on any response to the attack.
“Some doubt still exists about the quality constitution of the current Saudi production capacity, but that is not enough to scare the market,” said Olivier Jakob of Zug, Switzerland-based oil risk consultancy PetroMatrix.
Riyadh’s lightning pace in restoring production after the attack, ostensibly to safeguard the IPO prospects of its state oil company Aramco, has taken a toll on the risk pricing in oil.
As of Thursday, WTI was less than $2 higher from where it settled a day before the attack.
“In 2008, on the fear of Iran, WTI was trading at 145 $/bbl in a contango structure,” PetroMatrix’s Jakob said, referring to the market situation where the front-month contract traded at a discount to forward contracts.
“In 2019, on the fear of Iran, WTI is trading at 55 $/bbl in a backwardated structure,” he said, referring to the opposite situation to contango.