Oil pares losses after dive toward 12-year low

Updated 07 January 2016

Oil pares losses after dive toward 12-year low

NEW YORK/LONDON: Oil lurched to new 12-year lows before paring some losses on Thursday, with some traders betting a rout triggered by fears over China demand and swelling US stockpiles had run its course, for now.
Global benchmark Brent crude fell as much as 6 percent to nearly $32 a barrel, its lowest level since at least April 2004, as another free fall in the Chinese stock market rattled investors already concerned by the world glut in crude.
But by midmorning trade in New York, Brent pared those losses as some traders took profits after prices slid nearly 14 percent in four days.
“I’ll say it’s oversold on a short-term basis, though I am an oil bear,” said Tariq Zahir, who trades mostly longer-dated spreads in US West Texas Intermediate crude futures (WTI) for the Long Island, New York-based Tyche Capital Advisers fund.
“There’s covering and also some panic buying in an attempt to support WTI at above $32.”
Brent was 25 cents lower at $33.98 a barrel by 1718 GMT after sliding during European trading to a low of $32.16, a level last seen in April 2004.
WTI were down 50 cents at $33.47, after hitting a low of $32.10, their lowest since late 2003.
China allowed its yuan currency to slip on Thursday, sending regional currencies and stock markets tumbling globally. Stock market trading was suspended less than half an hour after opening after sharp falls triggered a new circuit-breaking mechanism for a second time since its introduction this week.
The crash raises the risk of slowing demand from the world’s No. 2 oil consumer, threatening to prolong an over year-long supply overhang.
“For sure, a minus 7 percent for oil over two days on just China, and a blowup of the whole macro trade, was not something I was expecting to see in the first two days of the year,” said Doug King, fund manager in London for the $220 million Singapore-based Merchant Commodity Fund.
US government data on Wednesday showed a 10.6 million-barrel surge in gasoline supplies, the biggest weekly build since 1993, rattling investors already concerned by near-record production and massive stockpiles around the world.
Prices also trimmed early losses after violence in the Middle East and North Africa offered a measure of support.
A military training center in the Libyan town of Zliten was hit by a truck bomb, causing dozens of casualties, witnesses said, while dozens of air strikes hit the Yemeni capital Sanaa.
Oil’s rapid fall has made a prediction that Goldman Sachs made last year that crude could fall as low as $20 a barrel seem less outlandish than it then seemed.


Oil recoups losses as OPEC, US Fed see robust economy

Updated 14 November 2019

Oil recoups losses as OPEC, US Fed see robust economy

  • US-China trade deal will help remove ‘dark cloud’ over oil, says Barkindo

LONDON: Oil prices reversed early losses on Wednesday after the Organization of the Petroleum Exporting Countries (OPEC) said it saw no signs of global recession and rival US shale oil production could grow by much less than expected in 2020.

Also supporting prices were comments by US Federal Reserve Chair Jerome Powell, who said the US economy would see a “sustained expansion” with the full impact of recent interest rate cuts still to be felt.

Brent crude futures stood roughly flat at around $62 per barrel by 1450 GMT, having fallen by over 1 percent earlier in the day. US West Texas Intermediate crude was at $56 per barrel, up 20 cents or 0.4 percent.

“The baseline outlook remains favorable,” Powell said.

OPEC Secretary-General Mohammad Barkindo said global economic fundamentals remained strong and that he was still confident that the US and China would reach a trade deal.

“It will almost remove that dark cloud that had engulfed the global economy,” Barkindo said, adding it was too early to discuss the output policy of OPEC’s December meeting.

HIGHLIGHT

  • US oil production likely to grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations.
  • The prospects for ‘US crude exports had turned bleak after shipping rates jumped last month.’

He also said some US companies were now saying US oil production would grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations — reducing the risk of an oil glut next year.

US President Donald Trump said on Tuesday Washington and Beijing were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony.

“The expectations of an inventory build in the US and uncertainty over the OPEC+ strategy on output cuts and US/China trade deal are weighing on oil prices,” said analysts at ING, including the head of commodity strategy Warren Patterson.

In the US, crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.

ANZ analysts said the prospects for US crude exports had turned bleak after shipping rates jumped last month.