How Low Can Oil Go?

Crude oil continued its decent to new lows trading at 41.96 surprising traders who did not think prices would ever fall below the $42 level. Brent oil weakened but not as much as WTI falling 11 points to 49.53. Crude in the initial trading rose for a in New York, extending its rebound from a six year low after U.S. crude inventories fell and investor concern over China’s currency devaluation eased.

Prices gained as much as 1% as Crude inventories slid by 1.68 million barrels last week to 453.6 million and production also fell, according to a report from the Energy Information Administration. U.S. stockpiles of crude and gasoline fell last week, data from the EIA showed on Wednesday, and bolstering sentiment in the U.S. market. On the contrary, China’s implied oil demand fell in July from the previous month amid a continuing drop in its vehicle sales that could mute growth further in the second half of 2015.

A measure of oil-price fluctuations rose to the highest level in almost four months on Wednesday after China devalued its currency a second day.

Both contracts ended a volatile session higher on Wednesday after the International Energy Agency, in its closely watched monthly report, said demand for oil is increasing at its fastest pace in five years. But gains were tempered by continued worries over supply, with U.S. inventory data showing a smaller-than-expected drop. Oil tanked earlier this week following the decision to weaken the yuan. The move will make China’s imports of commodities, including oil, more expensive, raising concerns about demand from the world’s second-largest economy.

Earlier Thursday, global financial markets—including oil futures—welcomed news from China that the central bank expects the yuan to stabilize, calling it a strong currency that is supported by solid economic fundamentals.

Prices have swung between gains and losses this week on mixed demand signals from China, while remaining almost 30 percent below their June peak amid a global glut. Off late prices again started hitting on oversupply concerns. WTI closed down to $42.24 barrel while Brent lost to $49.15 barrel.

Natural gas extended losses on Thursday, after data showed that U.S. natural gas supplies rose more than expected last week. Gas futures dropped 2.88%, to trade at $2.840 per million British thermal units. The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended August 7 rose by 65 billion cubic feet, above expectations for an increase of 55 billion and following a build of 32 billion cubic feet in the preceding week. Gas immediate support at 177 below which prices will fall further. Natural gas recovered a few points in the Asian session to trade at 2.813