Oil prices tumble to a 12-year low

Oil bounced back after tumbling below $30 a barrel for the first time in 12 years. A persistent oversupply means prices still haven’t staved off the threat of further declines.

Futures rose as much as 2.2 percent in New York, after dropping 3.1 percent on Tuesday. While the industry-funded American Petroleum Institute was said to report U.S. inventories fell 3.9 million barrels last week, government data on Wednesday is forecast to show supplies expanded. The world is now “confronting $20 oil,” according to Citigroup.

“The big picture for the market is still oversupply,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “It’s going to be a tough couple of months for prices, $30 oil is very painful.”

Crude lost 18 percent the previous seven sessions, the most since 2009, as volatility in Chinese markets fueled a rout in global equities and U.S. supplies remained about 100 million barrels above the five-year average. BP plans to cut 4,000 jobs, Petroleo Brasileiro slashed its spending plan and Malaysia’s Petroliam Nasional warned that it faces several tough years.

Brent for February settlement gained as much as 48 cents, or 1.6 percent to $31.34 a barrel on the London-based ICE Futures Europe exchange. The contract slid 69 cents, or 2.2 percent, to $30.86 on Tuesday, the lowest close since April 2004. The European benchmark crude was at a premium of 26 cents to WTI.

Supplies at Cushing, Oklahoma, the delivery point for New York futures and the biggest U.S. oil-storage hub, declined by 300,000 barrels last week, the API said Tuesday, according to a person familiar with the figures. Nationwide inventories probably rose by 2 million barrels through Jan. 8, according to a Bloomberg survey before an Energy Information Administration report.

The EIA cut its 2016 forecast for WTI by 24 percent to $38.54 a barrel, according to its monthly Short-Term Energy Outlook Tuesday. U.S. output will drop an average 700,000 barrels a day in 2016, and an additional 270,000 barrels a day next year, the report showed. Production averaged 9.2 million barrels a day through Jan. 1, according to EIA’s weekly data.

“The $20 number is something you have to talk about,” Ed Morse, the global head of commodities research at Citigroup, said Tuesday in Calgary. “When you’ve seen a $10 price slide and WTI is trading just slightly above $30, the likelihood is fairly great. Clearly oil markets cannot maintain a price at below the $30 level for very long. The question is how much longer.” Bloomberg