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Oil prices continue to climb, economic worries remain

LONDON, July 7, 2016

Oil prices continues to rise on Thursday with Brent crude oil futures  trading at $49.30 per barrel at 1208 GMT 50 cents above their last settlement but lower than the day's high of $49.53.

US West Texas Intermediate (WTI) crude was trading at $47.93 per barrel, up 50 cents from its last close but down from $48.14 earlier in the session.

Traders said that a reported drop in US crude oil stockpiles was the main price driver, while a slight weakening in the US dollar, which makes oil more affordable for holders of other currencies, also helped.

The American Petroleum Institute (API) said its data showed US crude stockpiles fell by 6.7 million barrels last week, declining for a seventh week in a row.

The data also was bullish for oil products, showing draws in both diesel and gasoline.

"Oil demand growth remains robust," UBS said in a note, adding that "an historically high level of physical inventories ... is no bar to a rising price if the direction of travel in market adjustment is supportive."

However, traders warned that an economic slowdown and a glut in supplies of refined products were weighing on oil markets.

Asian crude demand is slowing and by some measures falling, which market participants said could be due to an economic slowdown and perhaps even more permanent structural changes.

"Growth is slipping again ... and things don't seem quite so rosy," HSBC said in a note to clients.

While both stocks and sterling climbed on Thursday, oil industry observers warned that fall-out from Britain's vote to leave the European Union last month could weigh on oil prices if the market turmoil spread.

"Yesterday's optimism both in the equities and oil markets could evaporate quickly as the negative impact of Brexit will stay with us for the foreseeable future," analysts at PVM said in a note.

German industrial output plunged unexpectedly in May for its steepest monthly drop since August 2014, data showed on Thursday, suggesting Europe's largest economy lost steam in the second quarter after a surprisingly strong start to the year.

Oil supply was also showing signs of rising; Shell lifted force majeure on exports of Bonny Light crude oil, leaving just two grades under force majeure. Meanwhile, Libyan officials said oil export terminals that have been shut since 2014 could open again soon, potentially restoring 600,000 barrels per day of crude export capacity. - Reuters




Tags: Oil | US | Brent | Crude | price |

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