Oil prices advance amid falling output

– Reuters pic, September 23, 2015.Brent crude oil rose towards US$50 RM217) a barrel on Wednesday as a drawdown in U.S. crude oil stocks outweighed the negative impact of weak economic manufacturing data from China.

Overnight, crude futures were relatively flat on Thursday on a day of see-saw, choppy trading, as a sell-off among industrial stocks failed to offset gains from an inventory draw last week at the Cushing Oil Hub in Oklahoma.

Crude oil prices are moving higher amid concerns that low prices have led to too many crude production cuts.

US commercial crude oil inventories decreased by 1.9 million barrels from the previous week.

“I’m predicting a return to the low $40 levels or even below by next month”, said Tariq Zahir, a trader in crude oil spreads at Tyche Advisors in Laurel Hollow, New York. USA crude futures are still up almost 20% over the last month after falling to six and a half year lows in late-August near $38.

Flagging demand is dragging China’s factory sector into its sharpest contraction in 6-1/2 years, a private survey showed on Wednesday, triggering a flight to safety in Asian markets that analysts say could extend across the globe. Levels below 50 show a contraction.

Oil prices have been on the decline this year as the global supply glut continues to weigh on markets.

In related news, Hedge funds no longer sure oil prices will fall further: Kemp.

In her speech on Thursday, Ms Yellen argued in favor of raising interest rates later this year, providing more clarity to investors as markets have been volatile amid uncertainly around the increase in rates.

“With the economy showing little sign of recovery, the 7% GDP growth target set by the government may prove hard to achieve”, it added.

Yet a global oversupply that analysts estimate around 2.5 million barrels per day, remains largely in place due to high production elsewhere, for instance in Russian Federation and the Middle East, while demand is slowing, and oil prices have fallen back 10 percent since the beginning of September as the demand outlook has weakened along with economic growth.