Crude Oil Continues To Search For Bottom Level

Even with the lower greenback, crude oil continued to decline in the Asian session on Wednesday to fall to 42.94 giving up 18 cents while Brent gained 2 cents to reach 48.61. Crude oil prices were under pressure in Asian trading as sentiment remains weak and the market lacks any cues to trigger a near-term rebound. While oversupply concerns have been a constant drag on oil prices in recent months, the latest round of liquidations in the oil market came on the back of Beijing’s devaluation of the yuan and concerns over China’s economic growth.

Oil prices are trading lower today with WTI oil prices trading near 6 ½ year lows at 41.66 per barrel. Tumbling stock markets in China is adding to worries about global fuel demand at a time of heavy oversupply. Chinese stocks fell 6 percent on Tuesday as the yuan weakened against the dollar, raising fears that Beijing may further devalue the currency. Such a move could decrease China’s consumption and import levels. Industrial metals, including copper, also traded near six-year lows, adding to bearish market sentiment.

Both contracts eked out modest rebounds in closing deals in New York on Tuesday. Output in the US has turned out to be more robust than many had previously assumed, as shale firms have dramatically slashed costs and increased their efficiency rather than cutting production. Demand growth is not keeping pace with supply, especially with the slowdown in China, the world’s top energy consuming nation and its second-biggest economy.

Iran last month also reached an agreement with major world powers to rein in its nuclear ambitions in exchange for the lifting of crippling Western economic sanctions which have restricted its oil exports.

But analysts said prices were unlikely to stage a sustained rally because the market remains awash with supplies from the Organization of the Petroleum Exporting Countries led by Saudi Arabia.

Oil traders are also watching a report on US crude inventories in the week ending August 14 due later Wednesday to measure demand in the world’s biggest economy and large producer of shale oil.

Analysts expect inventories to decline, but also said stockpile levels remain high after a weaker-than-hoped rise in demand during the summer driving season.

Nynex crude futures were still in negative territory after settling at a fresh six-year low in the previous trading session. Bearish data included an increase in the U.S. oil-rig count by two in the latest week to 672, marking the fourth consecutive week of increases. Natural gas futures extended losses, after data showed that U.S. natural gas supplies rose more than expected last week. Gas futures in US dropped 2.88% to $2.705 MMBtu.