14 October 2015, News Wires – Oil edged up from near $49 a barrel on Wednesday as the prospect a supply glut could ease in coming months was balanced by concern demand will slow as economic growth moderates in number two consumer China, Reuters reported.
US shale production will fall by the most on record in November, the government forecast on Tuesday, suggesting the drop in oil prices since 2014 is curbing higher-cost supplies that have contributed to a current surplus, it said.
“Non-Opec supply will probably decrease more steeply than previously anticipated,” Carsten Fritsch, analyst at Commerzbank in Frankfurt, told the news wire.
“Shale oil production in the US, for example, is now falling sharply.”
Brent crude, after falling in the past two sessions, was up $0.10 at $49.34 a barrel as of 12:32pm GMT. Prices have more than halved from June 2014. US crude was up $0.10 at $46.76, Reuters added.
Crude also gained a lift from a weaker dollar, which fell to a three-and-a-half-week low against a basket of currencies as signs of economic weakness in China bolstered expectations the US will wait longer before raising interest rates, the report said.
Oil fell on Tuesday after the International Energy Agency (IEA) said the oil market would remain oversupplied in 2016 as a potential increase in supply from Iran counters slowing output from the US and other countries outside Opec.
Raising the prospect of slower oil demand, Chinese economic growth for the third quarter is expected to fall below 7% for the first time since the global financial crisis.
Not all in the market agree with the IEA.
“Oil demand growth is underestimated in most forecasts,” said Olivier Jakob, analyst at Petromatrix, who said the extra demand he expects to see next year would help absorb some of the additional Iranian supply.
The Opec dropped its policy of supporting prices by cutting output, choosing instead to defend market share against higher-cost producers such as shale.
While lower US shale forecasts suggests that strategy is working, the latest weekly US supply reports are likely to suggest no end to the glut is yet in sight.
Analysts expect reports from industry group the American Petroleum Institute (API) and the US Department of Energy (EIA) will show crude stocks rose by 2.9 million barrels. The API releases its data at 8:30pm GMT.