Oil prices mixed after China stimulus move

20th April 2015, Comments 0 comments

Oil prices diverged Monday as the market assessed fresh stimulus action by China against a background of a US crude supply glut.

US benchmark West Texas Intermediate for May delivery gained 17 cents to $55.91 a barrel.

Brent North Sea crude for June fell 66 cents to stand at $62.79 a barrel in London afternoon deals and after recent strong gains.

China's central bank has cut the reserve requirement ratio (RRR) -- or amount of cash that commercial banks must hold in reserve -- by one percentage point, the second such move this year to boost lending.

The People's Bank of China (PBoC) made the move effective on Monday.

Sucden brokers said investors were mulling "over the effects of the PBoC's decision to cut its reserve".

It added in a note that "market participants anticipate that the move will hopefully free up additional capital, as much as $200 billion, in an effort to stimulate lending but investors remain hesitant to commit to significant positions as market volatility spikes".

Dealers are also reading a drop in US oil rig activity as a sign of a production slowdown that could alleviate global oversupply and push prices up, analysts said.

The latest count by Baker Hughes showed rigs targeting US crude dropped by 26 to 734 last week, Bloomberg News reported.

Oil prices rallied last week on news that US shale output may be on the cusp of easing.

Crude prices collapsed more than 50 percent between June and January owing to the oversupply and weak demand.

"Indeed, there may be scope for oil prices to be lifted further in the near term both by falling US oil output and crude stock data, and by better news on the demand side from the economies of the US, eurozone and China," said Julian Jessop, head of commodities research at Capital Economics.


© 2015 AFP

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