Brent crude reversed early gains to trade near $57 a barrel yesterday, as the glut of oil that has halved prices since June overshadowed investors repositioning at the start of the year for an eventual recovery.
Brent has fallen to its lowest since 2009 as top exporter Saudi Arabia and other large Gulf producers declined to cut production in the face of fast-growing US shale oil output, despite pleas from other members in the Organisation of the Petroleum Exporting Countries (Opec).
“Nothing has changed on the supply side. Unless there are some supply cuts, oil markets can’t be strong at the moment,” said Ken Hasegawa, commodity sales manager at Tokyo’s Newedge Japan.
Brent crude for February delivery was up 8 cents at $57.41 at 0950 GMT, more than $1 below the day’s high at $58.54, which was hit within 30 minutes of the open of trading. Prices touched a post-2009 low of $55.81 on Wednesday.
Traders said a number of buy orders would have been placed ahead of the start of the new year’s trading, with some willing to bet prices will bounce this year as expensive oil projects are potentially shuttered or cancelled. Front-month US crude for February delivery was up 28 cents a barrel from Wednesday’s close at $53.55, after reaching an intraday high of $55.11 shortly after the start of trading.
Markets were shut on Thursday for the New Year holiday.
Prices faced pressure yesterday after a senior Libyan oil official said a major fire in an oil storage tank at the North African country’s largest crude export port had been extinguished.
Iraq, the second-largest producer in Opec, said exports averaged the highest since 1980 in December, reaching 2.94 million barrels per day.
Iran’s deputy foreign minister on Thursday called on its regional rival Saudi Arabia to take action to support oil prices, saying producer countries across the Middle East will be hurt unless the slump is reversed.
The jump in oil prices early yesterday was also capped by surveys showing weak factory activity in China in December, which underlined the challenges facing the country’s manufacturers as they fight rising costs and softening demand in the world’s second-largest economy.
China’s official Purchasing Managers’ Index (PMI) slipped to 50.1 in December from November’s 50.3, with weaker-than-expected oil demand growth in China last year contributing to the price collapse.
Eurozone manufacturing also ended 2014 on a subdued note as output, new orders and employment all recorded sluggish growth, a survey showed yesterday.
In the US benchmark oil prices took some support from data on Wednesday showing inventories fell by 1.8 million barrels in the last week, but an increase of two million barrels at the US crude contract’s delivery hub of Cushing, Oklahoma kept gains in check.