Oil Moves Away From 12-Year Lows As China Shares Rise

Demand for crude tends to fall when the USA dollar is stronger against currencies of purchasing countries and China remains the world’s biggest energy consumer.

Oil prices tumbled over 5 percent to levels not seen since the early 2000s on Thursday as a sliding yuan and a second emergency halt in China’s stock trading this week left Asian markets in turmoil.

The price of oil has shed around 70 per cent since the current downturn began in June 2014, causing pain to oil companies and governments that rely heavily on crude revenues.

Benchmark U-S crude futures were down $1.40 in trading Thursday morning, at $32.57 U-S a barrel in electronic trading on the New York Mercantile Exchange.

Adding to the continuing fall in oil prices, China depreciated the yuan on Thursday, sending regional currencies and stock markets tumbling.

At OPEC’s last meeting, their stance towards production indicated that they will continue with their policy of supporting production and defending market share in a low oil price environment.

Much of the distress in the oil markets can be attributed to market turbulence in China, where the CSI 300 Index dropped more than 7% after halting trading early to counteract sharp declines.

Analysts from Citigroup Inc.to UBS Group AG predict crude may fall near $30 over the next few months, while US crude stockpiles remain about 100 million barrels above the five-year average, according to Energy Information Administration data.

Cheap oil has been a boon to energy importing economies including Ireland over that period – cutting the cost of everything from manufacturing to running cars and heating homes. U.S. crude oil inventories decreased by 5.1 million barrels last week, but gasoline inventories surged to 10.6 million barrels and distillate inventories climbed to 6.3 million barrel.

“The worries over China this week have investors again wondering about the source of future demand for commodities”, said analyst Jasper Lawler at CMC Markets UK.

Iranian officials have repeatedly announced their will to increase oil exports as sanctions on the country are about to be removed.

“All looks set for yet higher oil inventories on top of already record high levels”, said Bjarne Schieldrop, chief commodities analyst at SEB in Oslo.