Oil prices firm before weekly US inventories

22nd October 2014, Comments 0 comments

World oil prices firmed on Wednesday as traders eyed recent upbeat Chinese data before the latest weekly update on commercial crude inventories in top consuming nation the United States.

However, oversupply and lingering concerns about demand in key markets are capping gains and keeping prices close to multi-year lows.

Brent North Sea crude for December won 62 cents to stand at $86.84 a barrel in late morning London deals.

US benchmark West Texas Intermediate for December delivery advanced 20 cents to $82.68 a barrel compared with Tuesday's close.

The oil market had fallen heavily last week, striking multi-year low points on demand fears in the face of mounting global economic doubts.

However, crude futures have since recovered somewhat, aided by stronger-than-expected Chinese economic growth and oil demand data.

Added to the picture, crude demand is expected to increase during the upcoming northern hemisphere winter months, when heating fuel usage hits a peak.

"The strong selling pressure last week has at least faded considerably," said Commerzbank analysts in a note to clients.

"The latest figures on China's oil demand have proved better than expected, which together with most of the US economic data being positive has eased concerns about demand.

"As winter approaches in the northern hemisphere, we should see the usual seasonal increase in demand for oil," they added.

Oil prices had risen on Tuesday on better-than-expected data on Chinese growth in the third quarter, especially a pickup in industrial output.

China's third-quarter economic growth rate came in at 7.3 percent, the lowest pace in five years, but faster than many analysts had expected.

That supported prices because China is the world's second biggest oil consumer after the US.

Later on Wednesday, at 1430 GMT, the US government's Department of Energy will publish its oil inventories report for the week ending October 17.

Crude oil reserves are forecast to have risen by 3.1 million barrels last week, according to analysts polled by Dow Jones Newswires.

Rising US stockpiles can weigh on oil prices because they tend to indicate weakening demand.

Nevertheless, WTI is still trading close to levels not seen since mid-2012, while Brent remains near to a four-year low.

Crude sank in line with worldwide markets last week on fears about the strength of the global economy as China, Europe and Japan struggle to kickstart growth.

However, bargain-hunting and hopes of looser central bank monetary policies have supported a rebound this week.

Adding to downward pressure on oil prices is a supply glut from increased output of shale in the US, and price-cutting by major producers such as Saudi Arabia.

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© 2014 AFP

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