Oil Prices Recover but Market Still on Edge Over China Volatility
January 08 2016 - 02:20AM
Dow Jones News
Crude-oil futures prices made a mild turnaround in early Asia
trade Friday but the market remains on edge as fears of more
volatility in the Chinese economy are keeping traders cautious.
Oil prices plunged to their lowest in more than a decade on
Thursday after the Chinese government allowed the yuan to fall
faster than anticipated. The move triggered a rapid-fire selloff in
the Chinese stock market that triggered the "circuit breaker"
mechanism, halting trading for the rest of the day within an hour
of the opening.
China has since suspended the mechanism without saying for how
long.
The Shanghai Composite Index opened up 2.2% Friday morning and
the Nikkei also gained 0.4% to 17844.59.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in February traded at $33.76 a barrel at 0240 GMT, up
$0.49 in the Globex electronic session. February Brent crude on
London's ICE Futures exchange rose $0.43 to $34.18 a barrel.
Oil prices have been under pressure this week because of rising
tension between Saudi Arabia and Iran. The escalating rift between
the two key oil producers further damps any chance of a
collaborative effort to cut global output, the main driver behind
the current glut.
The glut is expected to expand more as Iran is prepared to make
a full return to the oil market in coming months despite its
deepened fissures with the kingdom.
"The rebound is just technical correction. There are hardly any
positive news in sight and market confidence in the Chinese economy
is dwindling," said a Singapore-based trader.
Worries of slowing Chinese crude demand have exacerbated the
price declines for some time. Some say as China shifts from a
manufacturing-based economy to a serviced-based one, the country's
thirst for crude might subside.
However, others say such assumptions could be exaggerated
because the Chinese government and local refiners will continue to
take advantage of the current cheap oil to fill up their storages,
keeping Chinese demand elevated.
"The Chinese government has reissued importing licenses for the
local refiners, who will be eager to maximize the quotas so they
can be qualified for the licenses again next year," said Gao Jian,
an energy analyst at the Shandong-based SCI International.
Energy consultant Energy Aspects expects Chinese crude imports
to rise to around 7 million barrels a day this year as refiners
look to use up their allotted quotas.
"In addition, China's commercial and strategic petroleum
reserves will remain strong in 2016. Despite delays to completing
SPR tanks, the use of commercial and price sites is rising,
suggesting that filling in 2016 is likely to be around 150 million
barrels," the firm added.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
January 08, 2016 02:05 ET (07:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Service (NYSE:SCI)
Historical Stock Chart
From Feb 2024 to Mar 2024
Service (NYSE:SCI)
Historical Stock Chart
From Mar 2023 to Mar 2024