Oil prices have swung between gains and losses near the lowest closing price in almost four weeks as investors weighed a slowing pace of US drilling rig reductions against an interest rate cut in China.
Futures in New York rose as much as 0.5 percent and fell as much as 0.4 percent yesterday. The number of active machines targeting oil dropped by one through Oct. 23 after declining by 45 over the prior three weeks, according to Baker Hughes Inc.
China, the world’s second-biggest crude consumer, stepped up monetary easing with its sixth interest-rate cut in a year on Friday to combat deflationary pressures and a slowing economy.
Oil is failing to sustain a rally earlier this month of more than US$50 a barrel as surging US inventories bolstered speculation that a global glut will be prolonged. World crude supplies are expected to remain ample until at least the middle of next year while investment in the industry is set to shrink further, International Energy Agency executive director Fatih Birol said in Singapore yesterday.
“The recent spate of crude stockpile builds in the US is reinforcing that story about supply, that story about a saturated market,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone.
“Oil has very strong headwinds to get through,” he said.
West Texas Intermediate (WTI) for December delivery was at US$44.68 a barrel on the New York Mercantile Exchange, up US$0.08 at 2:48pm Singapore time. The contract slid US$0.78 to US$44.60 on Friday, the lowest close since Sept. 28. The volume of all futures traded was about 48 percent below the 100-day average. Prices have decreased 16 percent this year.
Brent for December settlement was 5 cents higher at US$48.04 a barrel on the London-based ICE Futures Europe exchange. Prices lost 4.9 percent last week. The European benchmark crude traded at a premium of US$3.36 to WTI.
The US rig count fell to 594, the lowest level since July 2010, Baker Hughes, an oilfield-services provider, said on its Web site on Friday. Drillers have cut the number of active machines by more than 60 percent since December.
Oil at US$50 a barrel is a “gift to the world” as prices should be low enough to spur economic growth, according to Ali Al Mansoori, the chairman of the Department of Economic Development in Abu Dhabi.
Crude might climb to US$60 by the end of next year, he said in an interview on Sunday in the capital of the United Arab Emirates, the fourth-largest producer in OPEC.
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