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Oil Prices Break Losing Streak as Chinese Imports Hit Record

Belridge Oil Field and hydraulic fracking siteBelridge Oil Field and hydraulic fracking site
Pump jacks at the Belridge Oil Field and hydraulic fracking site which is the fourth largest oil field in California. Kern County, San Joaquin Valley, California. Photograph by Education Images UIG via Getty Images

Crude futures rose on Wednesday for the first time in eight days, with U.S. oil pulling further away from the widely watched $30-per-barrel level breached the previous session, as Chinese data showed record imports in December.

The U.S. benchmark blend, West Texas Intermediate (WTI), was up 26 cents at $30.70 a barrel at 0608 GMT. On Tuesday, it fell 97c to close at $30.44 a barrel, after touching a low of $29.93, which was last seen in December 2003.

Brent, the global crude benchmark, was up 20c at $31.06 a barrel. The contract fell 69 cents to settle at $30.86, after bottoming at $30.34, on Tuesday.

The $30 mark is both a psychological and financial threshold and, in recent days, traders have poured money into $30 put options for expiration in February and March. Put options give buyers the right to sell crude at a certain price and sellers the obligation to buy it at that price.

“$30 may be intermediate support but I really honestly can’t say whether this is the bottom,” said Avtar Sandu, senior commodities manager at Phillip Futures in Singapore.

“We see a bounce off here…but a change in trend is not visible yet,” he said.

Chinese crude imports rose to a record 7.82 million barrels in December, up more than 21% from November, official data showed on Wednesday.

The world’s second-biggest oil consumer has been taking advantage of the oil price rout to stock reserves and increase exports of refined products, and may be set to overtake the U.S. as the world’s largest importer.

U.S. crude stocks fell by 3.9 million barrels in the week to 480.071 million, compared with analysts’ expectations for an increase of 2.5 million barrels, data from industry group the American Petroleum Institute showed late on Tuesday.

Crude stocks at the Cushing, Oklahoma, delivery hub for WTI fell by 302,000 barrels, API said.

That’s a tentative sign that low prices are starting to lead to a rebalancing of a drastically oversupplied market.

But the bearish outlook for oil remains after the U.S. government forecast on Tuesday that the global glut will swell until late 2017.

 

On Tuesday, British oil major BP Plc (BP) had said it would cut another 4,000 jobs as it tightened its belt once again, while Brazil’s national champion Petrobras (PBR) said it would its investment budget for the next five years by 25%, or $32 billion over the period. Meanwhile on Wall Street, Morgan Stanley had predicted crude prices could fall as low as $20 a barrel. Some analysts at banks like RBS and Société Générale see it going even lower.

Increased Iranian oil output should feed into oversupply this year with the expected lifting of Western sanctions on that country’s exports, the U.S. Energy Information Administration said.

The agency forecast that a limited decline in U.S. supplies next year and steady growth in global demand will help ease the glut only in the third quarter of 2017, the first decline after nearly four straight years of gains.