Oil market holds firm after 12-year lows

8th January 2016, Comments 0 comments

World oil prices crept higher Friday at the end of an exceptionally volatile week that saw 12-year lows on the back of oversupply and China-driven markets turmoil.

Traders were awaiting publication of a crucial employment report in the United States for a steer on oil demand in the world's top consumer of crude.

Around midday in London, Brent North Sea crude for delivery in February stood at $33.95 a barrel, up 20 cents from Thursday's closing level.

US benchmark West Texas Intermediate for February won 15 cents to $33.43.

World stock markets recovered slightly on Friday, with most European indices staging a modest rebound after China removed trading curbs, a move that underpinned Asian equities in earlier deals.

"Oil futures saw some demand today as there was a slight improvement in market sentiment after China's central bank fixed the yuan mid-point more or less the same from the previous day," said IG Markets analyst Bernard Aw.

This week's plunge in Chinese stocks is raising further concerns about the country's economic growth slowdown and its impact on oil demand.

China is the world's second biggest economy and top energy consuming nation.

Beijing attempted to reassure markets late Thursday by lifting a "circuit breaker" system that had led to the suspension of shares trading twice this week.

And the central bank set the yuan's reference rate against the dollar a little higher after eight straight days of weakening. Beijing's decision Thursday to set the peg at a five-year low sent shudders through markets, fuelling a global rout and sending oil to 12-year lows.

In tumultuous trade on Thursday, New York oil tanked as China's turmoil heightened worries about the nation's powerhouse economy.

WTI had tumbled to $32.10 a barrel, a level last seen in December 2003. Brent meanwhile sank to $32.16, its lowest point since April 2004.

"The trigger for the latest slide in oil prices has, of course, been worries about global demand, prompted by the concerns over China," Capital Economics research house said in a note.

The global oil market has suffered a calamitous start to 2016, tumbling also in response to a vast supply glut that has plagued prices in recent years.

Oil has been hammered by persistent crude oversupply, brought about by high production levels in the Organization of Petroleum Exporting Countries (OPEC) and in the United States, as producers compete for market share.

And despite initially lifting prices, a deepening diplomatic spat between key OPEC members Saudi Arabia and Iran has made it less likely for the group to agree to cut output in a bid to lower prices, analysts say.

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© 2016 AFP

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