Oil extends losses, nears $33 a barrel

“I’ll say it’s oversold on a short-term basis, though I am an oil bear”, said Tariq Zahir, who trades mostly longer-dated spreads in U.S. West Texas Intermediate crude futures (WTI) for the Long Island, New York-based Tyche Capital Advisors fund. The continuing tension between Saudi Arabia and Iran, both members of the Organization of the Petroleum Exporting Countries, is also fueling fears that a concerted effort to cut production within the cartel is even more unlikely.

Fresh concern that China’s slowdown will hamper global growth has wiped $2.5-trillion off the value of global equities this year, as the nation’s tolerance for a weaker currency is viewed as evidence policy makers are struggling to revive an economy that’s the world’s biggest user of resources.

“Negative sentiment is hurting demand expectations, growth is easing in China and there is a spillover from the inventory build in (US) gasoline stocks from yesterday and this is reflected in prices”, said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam. It was down 1.6 percent at $33.70 at 1439 GMT. The most-traded option on Nymex gave holders the right to buy February futures at $36, ahead of contracts to sell WTI for that month at $32 and $30.

It had closed below $35 for the first time in more than 11 years at $34.23 a barrel.

“Crude oil was in a bearish bias, so to reverse this trend you need to have some strong input, so the global rout in all assets isn’t helping”, Olivier Jakob, managing director at Petromatrix GmbH, said by phone.

The People’s Bank of China on Thursday reduced the yuan’s fixing by 0.51 percent to 6.5646, the weakest since March 2011 and a reminder of the August cut that sparked financial-market turmoil. Chinese markets were halted after only 30 minutes for their shortest trading day ever, leaving Shanghai to end 7% lower.

US Government weekly data showed a sharp drop in US commercial crude inventories of 5.1 million barrels but the figures also recorded a gain in US crude production of 17,000 barrels a day the fourth straight week of increases.

He said global markets were facing a crisis and investors needed to be very cautious, Bloomberg reported. Nationwide gasoline supplies rose by 7.1 million barrels and distillates by 5.6 million barrels.

Looking overseas, concerns over Chinese oil demand also pressured prices. The site has a working capacity of 73 MMbbl, according to the EIA.

But low prices are disastrous for the North Sea offshore oil industry, which needs higher costs to compete for investment against much lower cost-producing regions such as the Middle East. Thousands of jobs have been lost in Aberdeen since the slump began in July 2014.