Oil prices rebounded from 12-year lows in Asia today but the China-triggered global stock market turmoil and crude oversupply kept investors on edge.
The plunge in Chinese stocks is raising further concerns about the country’s economic growth slowdown and its impact on oil demand. China is the world’s second biggest economy and top energy consuming nation.
Beijing attempted to reassure markets late Thursday by lifting a circuit breaker system that had led to the suspension of share twice this week.
And the central bank set the yuan’s reference rate against the dollar a little higher after eight straight days of weakening. Beijing’s decision Thursday to set the peg at a five-year low sent shudders through markets, fuelling a global rout and sending oil to 12-year lows.
At around 0300 GMT, US benchmark West Texas Intermediate for delivery in February was up 45 cents, or 1.35 per cent, at USD 33.72 and Brent crude for February was up 41 cents, or 1.21 per cent, at USD 34.16.
WTI had hit a low of USD 32.10 at one point yesterday, the weakest since December 2003, while Brent touched USD 32.16, its lowest level since April 2004.
“Oil futures saw some demand today as there was a slight improvement in market sentiment after China’s central bank fixed the yuan mid-point more or less the same from the previous day,” said Bernard Aw, market strategist at IG Markets in Singapore.
“The trigger for the latest slide in oil prices has, of course, been worries about global demand, prompted by the concerns over China,” Capital Economics research house said in a note.
Oil prices have already been hammered by a persistent crude supply glut brought about by high production levels in the OPEC cartel and in the United States as producers compete for market share.
And despite initially lifting prices, a deepening diplomatic spat between key OPEC members Saudi Arabia and Iran has made it less likely for the cartel to agree to cut output in a bid to lower prices, analysts say.