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Reuters Poll Shows Oversupply to Curb Oil Price Recovery
Furthermore, with lower social spending and cuts to subsidies in Saudi Arabia, which faces the risk of oil staying low for longer, “comes the risk of rising domestic turmoil, as highlighted by the Arab Spring in 2011 when high inflation, lower growth and inequality resulted in mass demonstrations across the Middle East”, RBS said.
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The focus on Wednesday was USA government data showing a 10.6 million-barrel surge in gasoline supplies, the biggest build since 1993, which some traders said signalled a slow-down in demand that could prolong the global glut.
‘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’.
A stronger dollar following data on Friday the U.S. economy created a greater-than-expected 292,000 nonfarm jobs in December weighed on prices.
Shares on major exchanges fell for a sixth straight day on Thursday as investors fretted over the state of China’s economy and its ability to stabilise its stock market.
That was 0.5 percent weaker than the day before and the biggest daily drop since last August, when an abrupt near 2 percent devaluation of the currency also roiled markets.
At around 0300 GMT, US benchmark West Texas Intermediate for delivery in February was up 25 cents at $37.01 and Brent crude was trading 24 cents higher at $37.46. Instead, though, oil prices have fallen in recent days, actually sling to an 11-year low. Market estimates from Bloomberg suggest that China’s crude oil imports in 2016 may rise by 8% to 7.2 MMbpd.
While oil prices have bounced off lows, market participants remain unwilling to call an end to the slump. And in the past, a simmering conflict like this would have led to a spike in oil prices. The last time the price of Brent was so low was in July 2004.
“But with this newsflow from China, demand fears have come back”, said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg.
The oil market largely shrugged off rising political tensions in the Middle East. On Tuesday, Kuwait also recalled its ambassador to Iran following attacks on Saudi missions by Iranian protesters, state news agency Kuna reported.
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Using its crude in refineries instead of selling it into the market unprocessed would be similar move to other Gulf producers such as Saudi Arabia, although Iran’s challenge would be to raise financing as its existing overseas oil sale revenues are frozen as part of the sanctions.