Oil prices back under pressure, as Europe awaits the ECB

Oil prices were in retreat on Thursday after initially trying to recover from a sharp fall in Wednesday’s session. On Wednesday news broke in that US stockpiles had risen by 8.2m barrels – four times analysts’ forecasts. The CBOE Oil Vix jumped 20% on the day to 31.7 as trading volumes ballooned.

The size of the sell-off comes as a shock to traders after more than two months of prices holding in a tight range, with the market seemingly finding equilibrium as Opec production cuts were seen being counteracted by the increased output of US drillers.

Brent crude, lost 5%, off another 1.4% to $52.39 a barrel on Thursday.

The euro was also a touch firmer and Bund yields were trundling higher with Treasuries as traders awaited the latest monetary policy decision by the European Central Bank.

At the time of writing, US index futures suggested the S&P 500 would open later in the day at 2,362, recovering none of the 5.4 points lost on Wednesday when the S&P energy sector lost 2.5% amid the oil price rout. In Europe, the pan-European Stoxx 600 was down 0.3% as UK-listed oil explorers and miners attract sellers.

Energy company shares in Asia fared badly as they played catch-up. Australia’s S&P/ASX 200 lost 0.3% as resources groups weighed, and the same dynamic was a feature of a 1.2% drop for Hong Kong’s Hang Seng.

Tokyo’s Topix is relatively energy-light and so along with the sight of a weaker yen it outperformed with a 0.3% advance, helped by gains in the IT and consumer discretionary segments.