Oil prices edge up after 5 percent fall, but outlook weak

Oil fell to a six-month low in London as Iran vowed to boost production immediately after sanctions are lifted and manufacturing in China slowed.

US crude edged up 2 cents at $45.17 a barrel, after touching an intraday low of $44.83 in the previous session, the weakest since March 20. At one point during the day it was at US$49.52-its lowest since January 30.

Brent, the global benchmark, was down US$2.35, or 4.5 per cent, at US$49.86 a barrel by early afternoon.

Stable crude oil prices in the worldwide markets would help India manage its macro-economy well, chief economic advisor Arvind Subramanian has said.

In a repeat of the plunge at the year’s beginning, global crude oil prices dropped below the psychological Dollars 50-mark per barrel, from around USD 115 last year – this time in the wake of the Iran nuclear deal last month.

“We’re not saying it means the policy around high production and leaving the market to rebalance is going to change just yet, but the patience and resilience within Riyadh may be shorter than it was looking to be at the beginning of the year”, Energy Aspects geopolitical analyst Richard Mallinson said.

According to the Bank of America Merrill Lynch (BAML), the Brent crude could fall below the light crude oil of US by spring of 2016, provided that gasoline demand of US remains the same way.

The long-term oversupply concerns, refined products’ rising inventories, and the strong dollar could drag crude oil prices lower.

“Prompt prices are being driven by demand… and with run cuts on the way in Asia (due to falling margins), nearby crude prices and spreads (both in Asia and in the Atlantic Basin) will remain under pressure”, Energy Aspects said.

U.S. crude production added 52,000 barrels to 9.465 million barrels a day that week.

Nymex reformulated gasoline blendstock for September-the benchmark gasoline contract-rose 0.81% to $471.50 a gallon.

Market players looked ahead to Friday’s U.S. nonfarm payrolls report amid ongoing speculation the Federal Reserve was on track to raise interest rates in September.

Finance Minister Larry Howai had originally pegged the 2014/2015 national budget on an oil price of US$80 but that was adjusted downward to US$45 in response to significant declines in the price of oil.