Wednesday, October 14, 2015

Oil eases further below $50 on oversupply, China concern

A petro-industrial factory is reflected in a traffic mirror in Kawasaki near Tokyo December 18, 2014. REUTERS/Thomas Peter/Files

Oil eased further below $50 a barrel on Wednesday, pressured by concern a supply glut will persist and demand slow down as economic growth moderates in No. 2 consumer China.
Chinese growth for the third quarter is expected to fall below 7 percent for the first time since the global financial crisis. The International Energy Agency (IEA) said on Tuesday the oil market would remain oversupplied in 2016.

Brent crude was down 4 cents at $49.20 a barrel as of 1353 GMT (0953 EDT), in choppy trade. Prices have more than halved from June 2014. U.S. crude fell 10 cents to $46.56.

"Prices should remain low," said Daniel Ang, an investment analyst at Phillip Futures. "We are still in oversupply."

Crude gained some support from a weaker dollar, which fell to a 3-1/2 week low against a basket of currencies as signs of economic weakness in China bolstered expectations the United States will wait longer before raising interest rates.

The IEA forecast on Tuesday that oil demand growth would slow next year and a potential increase in supply from Iran would counter slowing output from the United States and other countries outside OPEC, keeping the market oversupplied. [IEA/M]

The Organization of the Petroleum Exporting Countries in 2014 dropped its longstanding policy of supporting prices by cutting output, choosing instead to defend market share against higher-cost producers such as U.S. shale oil.

In a sign the strategy is working, a forecast from the U.S. Energy Information Administration sees U.S. shale production falling by the most on record in November, extending a nationwide output decline into a seventh month.

"Non-OPEC supply will probably decrease more steeply than previously anticipated," said Carsten Fritsch, analyst at Commerzbank in Frankfurt. "Shale oil production in the U.S., for example, is now falling sharply."

Still, the latest round of weekly U.S. supply reports is 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 U.S. Department of Energy (EIA) will show crude stocks rose by 2.9 million barrels. 

The API releases its data at 2030 GMT, followed by the EIA on Thursday.

(Additional reporting by Meeyoung Cho in Seoul; Editing by Jason Neely and David Evans

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