On Thursday crude-oil futures were lower, but the market was subdued with Chinese traders away from their monitors for national holidays.
Prices have fallen as a result of a huge increase in U.S. oil stocks last week, although they’ve found some support from the recovery in equity markets. On Wednesday, the Dow Jones Industrial Average rose 1.8%, halting a three-day slide.
Brent crude was down 15 cents, or 0.3%, at $50.35 a barrel, while the U.S. benchmark was off 12 cents, or 0.3%, at $46.13 a barrel.
Oil is likely to keep trading lower on Thursday, as the market refocuses from the equity rally back to the U.S. inventory numbers, said Tamas Varga, an analyst at PVM Oil Associates.
The U.S. Energy Information Administration said in its weekly report Wednesday that crude oil inventories rose by 4.7 million barrels last week. Market analysts' expected a crude-stock rise of 32,000 barrels.
At 455.4 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years.
The news of increased stockpiles should have been “extremely bearish” but a recovery in equity markets after last week’s steep sell off gave prices support, Phillip Futures said in a daily note.
In the meantime, narrowing margins have forced Asian oil refineries across China, Japan, South Korea, Thailand and Taiwan to cut operations in recent weeks, which has started reducing crude oil demand in Asia.
“This was one of the reasons crude prices started to fall, even before the latest round of China fears emerged,” energy consulting firm Energy Aspects said in a weekly update.
Prices of crude have been under heavy pressure in recent months due to worries over a growing surplus in world markets. Global oil production is outpacing demand following a boom in U.S. shale oil production and after a decision by the OPEC last year not to cut production. Growing concerns over economic downturn in China combined with worries that the Federal Reserve will hike rates at its next policy meeting in September also weighed.
The U.S. dollar was broadly stronger ahead of Friday’s U.S. nonfarm-payrolls report on expectations that the jobs report will be positive and bolster the case for a U.S. interest rate increase in September. Oil markets will also be watching currency movements and the jobs data very closely for directional hints, traders said.
