Oil prices rebound amid falling USA output

Oil prices have been going down for more than a year and now, these are trading at less than half of what their peak levels were in 2014, thanks to huge oversupply by oil producers in North America an the Middle East.

Japan’s core consumer prices marked the first annual drop since the central bank deployed its massive stimulus programme over two years ago, casting further doubt on whether money printing can accelerate inflation to its 2% target. Demand was also bolstered by the resumption of coastal fishing and the approaching harvest. Its premium over US crude narrowed to below the key psychological mark of $2 a barrel as USA crude’s fundamentals improved relative to Brent.

But Brent is still down 24 percent so far in the third quarter, putting it on track for the second largest quarterly drop since 2008. The drillers in the United States have continued to cut back on the number of oil rigs that are in operation, which is something that has been happening for the past three weeks. China’s commercial crude oil stocks were virtually flat between July and August, but refined fuel stocks sank 7.82 per cent, the official Xinhua News Agency reported on Friday.

Traders in crude turned keen on soon to expire front-month contract in the West Texas Intermediate (WTI).

Market analysts say that there’s some crackspread action as the market moving towards WTI expiration on Tuesday.

The market for crude is bullish, as production is falling while demand is growing, leading to spurt in prices from $44.59 to $45.85 on New York Mercantile Exchange. Speculators have reduced bets about price fall by 14,569 contracts while bets on rise in crude prices have increased by 252.

Many analysts believe that oil prices could be reaching a recovery point, but investors are still anxious about a Chinese slowdown.

However, the DoE also revealed that American oil output rose by 19,000 barrels per day (bpd) to 9.136 million bpd, snapping a six-week run of lower production.

“If the EIA confirms the crude draw this afternoon, the market could go even higher”, said Tamas Varga, analyst at London brokerage PVM Oil Associates.