Heightening the oil market woes is weakening demand, especially in China which has seen the slowest economic growth in a generation.
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“It looks like it’s some technical trading, but you could put the China sticker on it”, Poulsen added. The two crude benchmarks hit 12-year lows earlier in the week after a plunge in China’s stock market roiled global markets. At the end of trading yesterday, the futures were trading at $33.75 per barrel, after having slumped to a low of $32.16 per barrel during the session.
Bloomberg noted that West Texas Intermediate (WTI), the United States benchmark, has started off 2016 as its worst year so far – with China’s market turmoil putting downward pressure on other benchmarks, as well, which are all now at very low levels.
World stock markets also tumbled on Thursday, in tandem with oil prices, as investors feared for the global economy on signs of a dramatic slowdown in major crude consumer China.
Cheap oil has been a boon to energy importing economies including Ireland over that period – cutting the cost of everything from manufacturing to running cars and heating homes.
“The world has been producing 1.5 million more barrels per day over the past year than demand”. 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.
US stockpiles of gasoline and distillates, including diesel fuel and heating oil, soared in the week ended January 1, offsetting a drop in crude supplies and pushing total inventories of crude and refined products to a record high, the US Energy Information Administration said Wednesday.
The government data also showed a gain in USA crude production of 17,000 barrels a day, taking it to 9.22 million barrels a day, the fourth week of increases in a row, and a rise in stockpiles at the Cushing oil hub in Oklahoma. Dissension between Saudi Arabia and Iran on cutting supplies is expected to push up global supplies of oil further.
“The sentiment is still extremely negative and short positions are still at excessive levels”, Hans van Cleef, senior energy economist at ABN Amro, told the Reuters Global Oil Forum.
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Compared with successive days of declines of more than 2 percent, crude oil prices staged a rally at the opening of trading in NY. However, some analysts say the upward trend in China’s demand growth could taper as Chinese manufacturing activity falters.
