Oil prices move away from 12-year lows as China shares rise

Evidence of slowing economic growth in China and India has meanwhile fuelled fears that even strong demand elsewhere may not be enough to mop up the excess crude from near-record production over the past year.

European benchmark Brent North Sea crude oil for February slumped to United States dollars 32.16, a low last seen on April 7, 2004.

‘That said, the $100 price for a barrel of oil that many had assumed was the “new normal” probably won’t be seen again in the foreseeable future’.

Oil prices plunged to more than a decade low on Thursday after the Chinese government allowed the yuan to fall faster than anticipated.

The average price for which members of the Organization of Petroleum Exporting Countries sell their crude fell below $30 a barrel for the first time since 2004, while spot prices for Western Canadian Select fell as low as $19.81 a barrel on Wednesday, the lowest since tracking began in 2008, according to data compiled by Bloomberg.

“The trigger for the latest slide in oil prices has, of course, been worries about global demand, prompted by the concerns over China”, Capital Economics research house said in a note.

“Demand won’t be coming to the rescue this time, with China and the way the world economy is shaping up”, said Doug King, chief investment officer at RCMA Asset Management and manager of that firm’s $225 million Merchant Commodity hedge fund. China consumes about 12% of the world’s oil, making it the world’s No. 2 user after the U.S.

Liz Grant, senior account executive at Sucden Financial, said, “LME metals were also mostly lower albeit in thin trading”. China is the world’s biggest energy consumer.

The US Department of Energy’s weekly report on Wednesday showed a sharp drop in US commercial crude inventories, by 5.1 million barrels to 482.3 million barrels in the week ending January 1. The country’s purchasing managers’ indices for December, published earlier in the week, failed to impress the market, while heavy declines on the Shanghai Stock Exchange triggered a circuit-breaking halt to proceedings a mere 30 minutes into the trading session.

Tracking this, Brent rose 58 cents to $34.33 a barrel by 0327 GMT, near an intraday high of $34.72.

A growing rift between Saudi Arabia and Iran isn’t helping either: It reduces the odds of OPEC agreeing to cut back production.

The global oil market has suffered a calamitous start to 2016, tumbling also in response to a vast supply glut that has plagued prices in recent years.