Global benchmark oil futures rallied more than 2 per cent on Friday, following Asian shares higher after Beijing deactivated a circuit breaker mechanism that was blamed for aggravating equity market crashes.
Advertisement
Geopolitical concerns overhung the market, from the diplomatic crisis between Saudi Arabia and Iran, a stream of weak Chinese economic data and North Korea s announcement Wednesday of a successful hydrogen bomb test.
Both commodities are plumbing price levels not seen since April 2004, according to the Oil Price Information Service.
The huge storage overhang means that even if USA production falls this year as drillers succumb to low prices, it will take many months to work down excess supplies.
The price of oil has shed around 70 percent since the current downturn began in June 2014, causing pain to oil companies and governments that rely heavily on crude revenues. Justin Yifu, a former economist with the World Bank, was quoted by China’s official Xinhua News Agency as saying the Chinese economy was in a state of transition and still has internal structural problems. Brent recovered slightly to $33.19 a barrel by 8:45 a.m. EST. Analysts said a buildup in US stockpiles was the main reason for the drop in WTI prices.
Brent crude fell 4.7% while US West Texas Intermediate was down 3.9%.
Benchmark U-S crude futures were down $1.40 in trading Thursday morning, at $32.57 U-S a barrel in electronic trading on the New York Mercantile Exchange. Crude slid Thursday to the lowest since December 2003 as market turbulence reverberated across the globe amid concern over economic growth in the world’s biggest energy consumer. Nationwide stockpiles declined by 5.1 million barrels to 482.3 million.
Oil has fallen every day this year, losing almost 10% in a sudden dive that makes last year’s Goldman Sachs warning of sub-$30 crude seem not so outlandish after all.
Oil capped the biggest two-year loss on record in 2015 as the Organization of Petroleum Exporting Countries effectively abandoned output limits amid a global glut.
“Unlike in previous cycles, oil prices this time around are expected to stay low for long”, she said.
“There is a weak backdrop given that the market is oversupplied”, he said.
This followed a drop of 6% on Wednesday.
Advertisement
“That said, the $100 price for a barrel of oil that many had assumed was the ‘new normal” probably won’t be seen again in the foreseeable future”, Jessop said.
