Benchmark U.S. crude for March delivery was down 12 cents to $28.23 a barrel in electronic trading on the New York Mercantile Exchange.
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The MSCI Asia Pacific Index climbed 0.3 per cent to 116.93 as of 9:13 am in Tokyo.
Prices have crashed about 75 per cent since mid-2014, hit by a ideal storm of a stubborn supply glut, the slowing global economy and the rebounding USA dollar.
“Sure the China’s economy has slowed down, but it is still growing at 6.9 per cent, which means its oil demand will not be too shabby”, said Barnabas Gan, a commodity analyst at OCBC.
Many commodities are traded in dollars, making them more expensive to holders of weaker currencies. If China’s demand for oil does indeed stay relatively strong, despite all the gloom-and-doom headlines about economic woes, that will eventually help build a floor for oil prices and set the stage for a comeback.
What’s behind the worsening glut?
“Although we do not formally forecast OPEC oil production, in a scenario whereby Iran adds 600,000 bpd to the market by mid-year and other members maintain current output, global oil supply could exceed demand by 1.5 million bpd in the first half of 2016”, the agency said in a monthly report.
For the past week, crude imports averaged 7.8 million barrels a day, down about 409,000 barrels a day compared with the previous week.
Asian shares and the dollar were higher on Thursday, but investors remained cautious as another shakeout on Wall Street and rising oil prices suggested volatility in financial markets will continue to risk the appetite of the investors.
“Oil prices are at a level where OPEC nations are all struggling”. Even as oil production remains high, the number of active US rigs as of January 15 had fallen by 61% from a year ago, according to Baker Hughes Rig Count.
West Texas Intermediate crude climbed 8.6 per cent, after sinking the most in more than four months on Wednesday as energy producers turned gloomier on the prospect of a recovery this year.
Brent is down about 22 per cent from the start of the year, in addition to the nearly 35 per cent plunge it suffered in 2015.
The result of all of these factors is downward pressure on oil prices, which have already been sliding to lows not seen in more than a decade.
Royal Dutch Shell Plc, which is buying BG Group Plc in the industry’s largest deal in a decade, said Wednesday it expects fourth-quarter profit to drop at least 42% after the rout in oil deepened.
The government bond prices also gained.
Firstly, it indicated, “financial strains in many oil exporters reduce their ability to smooth the shock, entailing a sizeable reduction in their domestic demand”.
India, as Iran’s biggest oil client after China, is one of NIOC’s key targets for increased sales now that the barriers to the open trade of its crude have been lifted.
Moreover, the fund noted that demand for oil had not picked up as the price has plummeted. “Unfortunately we are cutting drilling”, Lukoil’s chief executive Vagit Alekperov said.
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“Now NIOC will directly market its oil across the world”, said the source. Additionally, Russia has stated that they have nointention of cutting down oil supplies and the same holds true for Saudi.
