Crude oil prices started Thursday trading lower, but lifted after markets reacted to a mixed statement from the European Central Bank in inflationary pressures and future growth projects.
Crude futures slumped again in Asian trade on Wednesday, with US oil dropping more than 3 percent toward $27 a barrel and its lowest since 2003, on worries about global oversupply.
The oil market is bottoming after Brent crude, the global benchmark, dropped below $30 a barrel earlier this week, according to one of the world’s largest independent energy trading houses.
The chairman of Saudi Aramco, the world’s largest crude producer, said on Thursday that OPEC kingpin Saudi Arabia could withstand a prolonged period of low prices.
According to a Paris-based market analysis agency, “an estimated marked slowdown in world demand growth in 2016 as well as the expected arrival of more barrels of oil from Iran – should global penalties be alleviated – are likely to keep the market oversupplied through next year”.
Light, sweet crude for March delivery recently rose $1.68, or 5.7%, to $31.21 a barrel on the New York Mercantile Exchange.
Brent North Sea crude for delivery in March, the European benchmark, finished at US$29.25 a barrel in London, a gain of US$1.37 (4.9 per cent) from Wednesday’s settlement. Most is in Shandong province, a hub for so-called teapot refineries, many of which will be allowed to import oil for the first time this year.
“Where will we be by year-end I don’t know but certainly I would bet that it is going to be higher than where we are today”. Separately, Thursday’s government report from the Energy Department could show that US crude stockpiles increased by 3.0 million barrels for the week ending on January 15.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.30% to an intraday low of 98.69.
Despite the gains in oil prices Friday, the fundamental outlook remains unchanged for oil supply.
Global financial markets seem to be overreacting to falling oil prices and the risk of a sharp downturn in China’s economy, Maurice Obstfeld, the International Monetary Fund’s chief economist said on Tuesday.
“Fundamentally, oil prices are already too low if you look at the medium to long term”, said Nunan, “but how far will sentiment continue to drive prices is hard to say”.
Dunand said several factors have driven oil prices down this month, including concern about the return of Iran to the market and economic weakness in China.