Oil steadies below $32 as investors book profits

*An offshore oil rig.

*An offshore oil rig.

12 January 2016, London — Crude oil steadied near $32 per barrel on Tuesday, recovering slightly as investors booked profits after it fell to a near-12-year low on concerns about oversupply and fragile demand from China.

Prices are down around 15 percent since the start of the year, dragged lower by a glut, China’s weakening economy and stock market turmoil, as well as the strong dollar, which makes it more expensive for those using other currencies to buy oil.

Benchmark Brent crude fell to a low of $30.43 per barrel, a level last seen in April 2004, before recovering to $31.75, up 20 cents or 0.5 percent, by 1142 GMT.

“Every time you hit new lows there’s the potential for profit taking, and as people try to pick the bottom of the market,” said Richard Mallinson, geopolitical analyst at Energy Aspects.

U.S. crude West Texas Intermediate (WTI) fell to a low of $30.41 per barrel, a level last seen in December 2003, before crawling back to $31.06, down 35 cents or 1.11 percent.

The overall tenor of the market remained bearish, analysts said.

Trading data showed that managed short positions in WTI crude contracts, which would profit from a further fall in prices, are at a record high, indicating that many traders expect further falls.

China’s slowing economy has also weighed on oil, which has shed more than 70 percent of its value since mid-2004.

And while demand looks fragile, supply from key producers remains robust.

Iraq, second-biggest producer within the Organization of the Petroleum Exporting Countries (OPEC), plans to export a record of around 3.63 million barrels per day from its southern oil terminals in February, said trade sources citing a preliminary loading program.

In industry news, Nigeria’s oil minister said a “couple” of OPEC members had requested an emergency meeting, adding that current market conditions support the need to hold such a gathering.

Oil major BP announced plans to cut at least 4,000 jobs in the face of oil’s sustained declines.

Analysts at Barclays, Macquarie, Bank of America Merrill Lynch, Standard Chartered and Societe Generale all cut their 2016 oil forecasts this week.

StanChart analysts took the most bearish view: “We think prices could fall as low as $10/bbl before most of the money managers in the market conceded that matters had gone too far,”
*Simon Falush, Henning Gloystein & Aaron Sheldrick; Dale Hudson & Jason Neely – Reuters

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