Brent crude oil prices edged above $50 per barrel for the first time in a week on Thursday as lower stocks in the United States and peaking production by some producers appeared to help reduce huge oversupply, although Asia’s economies showed new signs of weakness.
U.S. West Texas Intermediate (WTI) crude futures were trading at $47.21 per barrel at 0645 GMT, up 6 cents from their previous close, while Brent rose to a high of $50.14 before retreating back to 49.98 a barrel, though still up 23 cents.
That followed a price jump of as much as 6 percent in the previous session when data from the U.S. Energy Information Administration showed the largest crude drawdown since February 2014 at the Cushing, Oklahoma, delivery point.
Singapore-based brokerage Phillip Futures said that the stock draw was “a result of higher refining activity and lower U.S. crude production which is helping the U.S. inventory glut to ease off”.
Some analysts said that oil markets may have bottomed out following over a year of tumbling prices as producers start cutting back output.
“Non-OPEC, non-U.S. oil supply (e.g. Yemen, Mexico, Malaysia, Colombia and China) has peaked and is starting to decline as double-digit capex cuts start to impact production,” Bernstein Research said.
The cuts would result in a combined reduction of 400 million barrels per day by the end of the year, but it added that “markets could remain oversupplied through 2016” despite the scale-back.
Oil traders said they are concerned that a weakening Asian economy could undermine oil demand, slowing a rebalancing of the market which will require to either cap production or find a buyer of at least 2.5 million barrels per day of excess oil.
Japan’s exports slowed for a second month in August in a sign that China’s economic slowdown is spreading.
Meanwhile, traders are keeping a close eye on whether the Federal Reserve would later in the day raise interest rates for the first time in almost a decade.
Higher U.S. interest rates would likely attract cash from money traders, lifting the dollar. That could be bearish for dollar-denominated oil as it would make fuel more expensive for importers who hold other currencies.
Source: Reuters
