Oil market stable after slide

24th September 2015, Comments 0 comments

Global oil prices held firm on Thursday in choppy deals, after sliding the previous day in response to rising US oil output.

New York's benchmark West Texas Intermediate for delivery in November added 25 cents to $44.73 a barrel compared with Wednesday's close.

Brent North Sea crude for November delivery won 38 cents to stand at $48.12 a barrel in late afternoon London trade.

"Oil prices continue to chop around aimlessly, though they did hit one-week lows as concerns about weak demand in the US keep downward pressure on prices," said CMC Markets analyst Michael Hewson.

Crude futures had fallen on Wednesday after the US government's Department of Energy reported that American oil production rose last week by 19,000 barrels per day to 9.136 million, snapping a six-week run of lower production.

That overshadowed figures showing US commercial crude inventories sank 1.9 million barrels in the week ending September 18. Market expectations had been for a lighter drop of 1.25 million.

"The slight week-on-week increase in US crude oil production is doubtless to blame for (prices) coming under pressure," said Commerzbank analyst Carsten Fritsch.

"This presumably came as a disappointment in particular to those market participants who had been betting on a faster reduction of the oversupply given all the previous reports of declining drilling activity."

The US energy report came the same day it was announced that a gauge of factory activity in China had hit a six-and-a-half-year low in September, stoking fresh demand fears in the world's second-biggest economy.

The closely watched PMI for Chinese factory activity came in at 47 in September, down from August and the lowest since March 2009.

A result below 50 indicates the manufacturing sector is contracting, while anything above shows expansion.

"Logic states that markets ought to have become used to poor Chinese economic data by now," added analysts at brokers PVM.

"Well, logic does not always prevail and this was seen yet again following fresh evidence of a slowdown in the world's second-biggest economy."

Concerns about a slowdown in the global economy, particularly in key energy consumer China, combined with an oversupply have seen oil prices fall more than 60 percent from last year's peaks above $100 a barrel.

Weaker growth in energy-hungry China this year is meanwhile expected to cause a slowdown in the rest of the region, the Asian Development Bank warned this week as it became the latest major body to revise down its forecasts.

The Bank said Tuesday that growth in Asia would hit 5.8 percent this year and six percent in 2016. The March forecasts were for 6.3 percent for both years.

And it tipped China to expand 6.8 percent this year, instead of the 7.2 previously estimated, following a stream of weak indicators including on trade, inflation, investment and consumer spending.

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© 2015 AFP

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