Oil Prices Rebound From 12-year Lows

“We think low US$30 (per barrel) is a floor, but once positioning gets so biased, anything can happen”, said Virendra Chauhan, analyst at Energy Aspects in Singapore.

Oil prices steadied around 11-1/2-year lows, after rising earlier during the day following Chinese shares higher, as persistent global oversupply and a bleak demand outlook weighed on prices. Stockpiles at Cushing, Oklahoma, the delivery point for USA benchmark crude, rose to a record while nationwide stockpiles remain about 100 million barrels above the five-year average, according to Energy Information Administration data. Economic turmoil in the country at a time when crude oil markets were experiencing a supply glut, added to the weakness in oil prices since mid-2014. The two benchmarks hit 12-year lows earlier in the week after China’s stock market crash roiled global markets.

A stronger dollar following data on Friday the USA economy created a greater-than-expected 292,000 nonfarm jobs in December weighed on prices.

Lower crude oil prices in 2015 reflected the sustained excess of crude oil supply over global demand.

In a move that motoring organisations said would trigger further cuts in petrol prices, the cost of Brent crude dropped by 5% during trading in London to stand at $34.60 (£23.66) a barrel.

Oil prices fell to below $35 per barrel for the first time since 2004 last night – this is a drop of 5% since last weekend when the beheading of Shiite cleric Nimr al-Nimr by Saudi Arabia led to the cutting of diplomatic ties between Iran and the country.

In the United States, West Texas Intermediate (WTI) futures were also down over 3%, setting fresh 2009 lows of US$33,77 per barrel.

After less than half an hour opening, stock markets of China were suspended, marking a second emergency suspension this week. (BHI) said Friday that the number of active USA rigs drilling for oil fell for a third straight week, down 20 to 516 rigs.

China is not only the second largest economy in the world, it also is the second largest consumer of crude oil. As part of the fortnightly revision undertaken by public sector oil companies, the price of petrol was on January 1 cut by 63 paise per litre while that of diesel was lowered by Rs 1.06 a litre on the back of a softening global oil market. Some investors are protecting themselves by acquiring put options giving them the right to sell at $25 a barrel, anticipating that Brent will fall below that.