Oil prices steady after volatile week of trading
SINGAPORE – Oil prices were little moved in early Asian trading on Friday after a volatile week that saw sharp falls along with Chinese equities followed by a strong rebound on the back of extreme government support measures.
Meanwhile, oil traders were awaiting news of whether a compromise could be reached between major world powers and Iran that could lead to sharply increased oil flows if sanctions against Tehran are lifted, although the U.S. government said overnight that it was in no rush to reach a deal.
Front-month U.S. crude futures CLc1 were trading at $52.79 per barrel at 0146 BST, almost unchanged from their last settlement, although prices remain more than 7 percent below last Friday.
Front-month Brent crude LCOc1 was down 9 cents at $58.52 a barrel, some 3 percent below the end of last week.
The biggest market mover this week has been China’s stock market turmoil, with the government forced to launch emergency measures to halt a 30 percent fall in prices since June.
“To put things in perspective, the fall in market capitalisation in the share market (of China) alone since its peak in June is equivalent to almost 10 times Greece’s GDP. Meanwhile commodity prices are again falling rapidly,” Goldman Sach said.
Analysts said that China’s general oil demand should remain strong this year despite the stock market trouble and an economy growing at its slowest pace in a generation.
“Oil demand growth this year has been disconnected from the fundamental realities of China’s growth trajectory,” Michal Meidan of consultancy China Matters said in a report.
“The rapid increase in China’s apparent oil demand growth has been due first and foremost to stockpiling, while real demand has also been supported somewhat by low oil prices,” she added.
While low oil prices hurt oil producers, importers stand to benefit.
“Lower oil prices deliver a favourable mix of stronger growth and lower inflation for all countries in the (Asia) region, except Malaysia,” Bank of America Merrill Lynch said in a report.
“Thailand, Korea, Singapore and India are the biggest beneficiaries of lower oil simply because they are the biggest net importers of oil,” it added. -Reuters