U.S. crude hit contract lows, trading less than $1 per barrel above its bottom for 2015.
“There hasn’t been a lot of hard news that would explain it, but we’ve had such a sharp decline in the last week or so, that people feel we’re close to a bottom and it’s time to buy in”.
Oil’s slump makes crude so attractive to China that even the biggest drop in its currency since 1994 probably won’t deter its ambition to hoard supplies. China also devalued its currency, suggesting economic growth there was softer and could cause lower crude demand.
Analysts have said the move is an attempt by the cartel’s kingpin Saudi Arabia to defend its market share as it fends off competition from US shale oil. The largest U.S. production in more than three decades has reduced America’s need for imports, leaving suppliers competing to ship cargoes to other markets such as Asia.
In its monthly report Tuesday, OPEC raised its forecast for non-OPEC supply this year by about 90,000 barrels per day. Analysts said they expected China’s government to intervene further this year in stimulate economic growth.
Brent was down 19 cents at $48.42 a barrel at 0854 GMT, after touching $48.24 earlier in the session, the lowest in over six months.
Last week Bank of America Merrill Lynch issued a downbeat assessment, noting: “The glut in global oil supply remains humungous”.
“I think that there is definitely going to be more bearish momentum to what we are seeing now, and we could see oil prices fall further”.
According to industry research group Baker Hughes (NYSE:BHI), the number of rigs drilling for oil in the U.S. increased by six last week to 670, the third straight weekly gain.
Crude oil prices are getting a bit of a respite from the persistent selling that engulfed prices since the middle of June. The global benchmark London Brent crude slipped again below the psychological $50-a-barrel-mark, after rallying nearly four per cent on Monday. This was largely driven by production from Iran – which reportedly reached pre-sanction levels during July.
Oil futures remained negative on Tuesday, as Brent’s return above the $50 per barrel level overnight proved to be short-lived, while corn futures turned sharply lower tempering an overnight spike of above 4%, and base metals remained in the red.