Published: Sat, July 16, 2016
Economy | By Melissa Porter

Oil falls on glut fears, but China's economic data curbs losses

Fears of a continued crude glut persisted Wednesday as the IEA said that while a market balance is upon us, "the existence of very high oil stocks is a threat to the recent stability of oil prices".

August crude was at $45.85 a barrel on the New York Mercantile Exchange, up 17 cents, or 0.4%, from Thursday's settlement.

Brent crude, the global oil benchmark, fell 1% to $46.91 a barrel on London's ICE Futures exchange.

Crude futures were also buoyed by the weaker dollar, which makes dollar-denominated oil cheaper for buyers using stronger currencies. The UK central bank was widely expected to ease after Britain's vote last month to leave the European Union caused market turmoil. Data this week showed USA gasoline inventories increased and consumption slowed even during the Independence Day holiday, usually a period of peak use.

Crude oil prices nudged higher Friday, adding to modest weekly gains despite signs that USA production is picking up. For the week, WTI oil was down about 1.5% in the latest dealings, while Brent was poised for a loss of about 1.1%. The contract rose 93 cents, or 2.1 percent, to end at $45.68 a barrel in the previous session. Today's Baker Hughes report on the USA rig count will be a key driver in setting future crude oil prices and will also give insight on the strategy United States producers plan to implement.

Higher levels of inventories for both crude and refined products in a peak summer season are also posing a question mark on the demand side.

Many had expected record driving trips and low pump prices to boost gasoline usage this summer.

The result was steady from the first quarter and slightly better than expected as the government stepped up efforts to stabilise growth in the world's second-largest economy.

"The high level of inventories remains a concern and will require a market deficit over an extended period to get it back to a more sustainable level", ANZ analysts said in a note. "In the near term, oil supply from Libya seems unlikely to increase enough to impact global markets", said research firm ClearView Energy Partners LLC.

"Some U.S. drillers seem to be succeeding in streamlining production and expenses of extracting the crude oil and are able to produce at a cost of around $40 [a barrel] by cutting costs and improving efficiency", said Michael Poulsen, oil analyst at Global Risk Management.

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