Advertisement
Advertisement

Oil Prices Expected To Remain At Current Level Until 2016

By:
Barry Norman
Updated: Aug 27, 2015, 09:05 UTC

Crude oil gained 86 cents in the Asian session Thursday morning bouncing up to 39.47 but remains well under the significant $40 price. A drop in US

Oil Prices Expected To Remain At Current Level Until 2016
Oil Prices Expected To Remain At Current Level Until 2016
Oil Prices Expected To Remain At Current Level Until 2016

Crude oil gained 86 cents in the Asian session Thursday morning bouncing up to 39.47 but remains well under the significant $40 price. A drop in US inventory as reported on Wednesday helped support the energy product. Huge stimulus from China also helped pushed oil prices as implied demand increases with larger stimulus. Brent oil added 56 cents to 44.16.

The threat of job losses has forced Beijing to inject money into the economy through railway construction and other measures, setting back efforts to reduce reliance on investment.

Beijing has cut interest rates five times since November. That reduces financing costs for state companies but does little for entrepreneurs who generate wealth and jobs but have little access to the state-owned banking industry. Private-sector analysts say the quickest way to revive the state-dominated economy is to move faster on promised reforms to give entrepreneurs a bigger role.

The US Department of Energy said on Wednesday US crude supplies unexpectedly fell by 5.5 million barrels for the week ending August 21, indicating healthy demand. However, US crude production slipped a scant 11,000 barrels a day in the same period, keeping output above 9.3 million barrels and not far from a decades-high production level. In another bearish indicator, gasoline supplies increased by 1.7 million barrels, adding to concerns of a global glut of energy supplies.

crude oil thur

brent oil thurs
Energy prices touched their lowest levels since early 2009 on Monday over concerns China’s slowing economy will curb demand for the commodities that have helped drive its growth over the past three decades. The devaluation of the yuan two weeks ago largely fuelled the economic fears that sparked the rout, which also saw heavy losses in most global commodities and equity markets.

London-based Capital Economics predicted a rebound in commodities markets, saying that “much of the bad news was already baked in the cake before the latest sell-off”.

Wang Tao, a Reuter’s market analyst for commodities and energy, said Brent crude may approach resistance at $44.64 per barrel again, as its bounce from the Aug. 24 low of $42.23 seemed to be incomplete.

In other financial markets, a rebound on Wall Street helped soothe investors’ tattered nerves, while the dollar rallied as risk aversion eased.

Regaining confidence after a sharp rebound on Wall Street where investors had been hit by worries over China’s faltering economy, London copper futures also strengthened on Thursday.

Data released on Wednesday showed U.S. non-defense capital goods orders excluding aircraft, which is a proxy for business investment, increased 2.2 percent in July, the biggest rise since June last year and handily beating expectations.

The price of oil cannot stay at its current sub-$50 levels beyond next year, energy analysts have warned. Due to a lack of growth in North American shale production and increased decline in mature fields, a Brent price as low as $50 per barrel is not sustainable beyond 2016, according to research from Rystad Energy.

 

You also might be interested in: “Chinese Fears Recede

About the Author

Did you find this article useful?

Advertisement