Oil prices steady after overnight tumble on dollar strength, China concerns
SINGAPORE (Reuters) – Oil prices steadied in early Asian trade on Tuesday after sharp falls the session before to the lowest in about three weeks as a stronger US dollar and a drop in Chinese refining runs hit the market.
Global benchmark Brent crude futures were up 13 cents, or 0.3 percent, at $50.86 at 0325 GMT. That was just above their 100-day moving average, briefly breached in the previous session.
US West Texas Intermediate crude futures were up 7 cents, or 0.2 percent, at $47.66 a barrel.
Oil prices tumbled more than 2.5 percent on Monday in volatile trade as the dollar strength and the demand concerns in China, the world’s second-largest oil user, weighed on sentiment. A stronger dollar tends to limit the demand for oil for buyers paying in other currencies. Both Brent and WTI had reached two-month highs on Aug. 10.
“Stale speculative long positioning and a reluctance to hold unprofitable positions has been the main force behind the oil rally running out of steam over the last few sessions,” said Jeffrey Halley, senior market analyst at brokerage OANDA.
Chinese oil refineries operated in July at their lowest daily rates since September 2016, official data showed on Monday, to ease brimming inventories as state-owned oil giants faced off independents in a retail petrol price war.
Analysts said the drop was steeper than expected, exacerbating concerns that a glut of refined fuel products could weaken Chinese demand for oil.
The dollar firmed on Tuesday after North Korea’s leader signalled that he would delay plans to fire a missile near Guam, further easing tensions and prompting investors to move back into riskier assets.
The dollar index, which measures the greenback against a basket of six major currencies, climbed 0.4 percent on Monday and was up 0.1 percent on Tuesday.
Oil prices had earlier on Monday been supported by reports that Libya’s top oilfield had cut its output by 30 percent on security concerns.
Efforts by the Organisation of the Petroleum Exporting Countries and other oil producers to limit output have helped lift Brent past $50 a barrel, but concerns remain that these efforts could be undermined by producers in the US and other countries.
US shale oil production is expected to grow for its ninth consecutive month in September to 6.15 million barrels per day, the US Energy Information Administration said on Monday. “Brent oil may fall more to $50.09 per barrel,” said Reuters technical commodities analyst Wang Tao, citing charts showing Brent’s wave pattern and a Fibonacci ratio analysis.