Oil prices rebound in Asia on bargain hunting

Oil prices edged up in Asia Thursday on bargain-hunting after a sharp decline the day before, although analysts said the market remains hobbled by an oversupply.

“With weak Chinese industrial production, we may see Chinese manufacturing PMI worsen, thus, leading to weaker oil prices”, he said, referring to the forward- looking Purchasing Managers’ Index to be released later this week.

Oil prices fell about 2 per cent to 3-week lows on Wednesday as the United States government reported a bigger build than expected in crude stockpiles, although significant drawdowns in gasoline and distillates prevented a steeper slide in crude futures. The November contract, which expired on Tuesday, finished down 34 cents at $45.55 per barrel.

“The products draws is providing a bullish tilt to the market”, said Matt Smith, commodity research director for the New York-headquartered energy consultancy and database Clipperdata.

The Buzzard oilfield in the North Sea, the largest contributor to the Forties crude stream that helps to set the global oil price, was, meanwhile, gradually ramping up production after a four-day outage.

The chart below compares changes in crude oil inventory levels this year versus the average changes over the last ten years and since 1983. “Clearly this is not helping the oil bulls”, he said.

Investors are also focusing their attention on the outcome of the OPEC (Organization of the Petroleum Exporting Countries) meeting, which may see a potential cut in production, shifting the available supply of Brent relative to WTI down. “The low volumes and market moves are reflecting that”, he said. Brent crude, a global benchmark, has slumped 42 percent in the last 12 months and was at $49.73 a barrel in London at 10:34 a.m. local time.

Austrian oil producer OMV lowered its forecasts for crude prices, envisioning $55 a barrel for 2016; $70 in 2017; $80 in 2018 and $85 a barrel from 2019 onwards.

The US and the European Union on Sunday took formal legal steps to lift sanctions on Iran once Tehran meets the conditions tied to a landmark nuclear agreement with major world powers. That would be the longest run of gains since April and keep supplies more than 100 million barrels above the five-year seasonal average, according to EIA data.