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Oil trades lower though China GDP data helps pare losses

Published 07/15/2016, 04:42 AM
Updated 07/15/2016, 04:42 AM
© Reuters.  Crude futures trade lower on supply glut worries

© Reuters. Crude futures trade lower on supply glut worries

Investing.com - Oil prices fell in European trade on Friday on concerns over the supply glut, though positive growth figures out from China helped to pare losses.

Crude oil for August delivery on the New York Mercantile Exchange fell 53 cents, or 1.16%, to trade at $45.15 a barrel by 8:40 AMGMT, or 4:40AM ET.

A day earlier, New York-traded oil gained $0.77, or 1.72%, bouncing off near two-month lows amid heavy short covering on Thursday, even as investors expressed significant concerns on a global oil and gasoline supply glut in the wake of a bearish U.S. stockpile report from the previous session.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for September delivery lost 54 cents, 1.14%, to $46.83 a barrel, after having closed up $0.96, or 2.08%, on Thursday.

Positive figures with China’s gross domestic product (GDP) helped pare the losses after showing a 6.7% gain in the second quarter ended June year-on-year period, beating the 6.6% rise seen, and also rose 1.8% quarter-on-quarter, better than the 1.6% increase expected.

Also in China, fixed asset investment rose 9.0%, less than the 9.4% year-on-year gain seen in June, while industrial production gained 6.2%, better than 5.9% seen in the same period and retail sales rose 10.6%, a tad better than 10.0% seen.

While crude inventories in the U.S. fell by a less-than-expected 2.5 million barrels over the first week of July, market players focused more intently on a considerable 4.1 million build in distillate fuel inventories, the largest weekly amount in six months.

Even as travel throughout the U.S. remains high during the key summer driving season, demand in gasoline has not been strong enough to offset vast supply builds. At the Petroleum Administration for Defense Districts 1 (PADD 1) region in the East Coast, distillate fuel inventories rose by 1.172 million last week, representing nearly one-third of the overall gains.

The sizable build prompted analysts from Energy Aspects to issue predictions of further declines in oil prices, due to the "epic gasoline surplus."

Investors continued to digest a bullish monthly report from OPEC earlier in the week after the world's largest oil cartel said it expects world demand to increase by 1.2 million barrels per day in 2017, climbing at a faster pace than current supply estimates. For the time being, however, energy traders focused on reports of swelling supply levels among top OPEC producers such as Saudi Arabia and Iran. In June, the Saudi kingdom pumped an additional 66,500 bpd in comparison with its output in May, as production rose to 10.308 million bpd.

As a result, OPEC output for the month averaged 32.86 million bpd, up 264,000 from the previous report. Notably, the measure included the return of Gabon to the group, adding an additional 214,000 to the monthly total.

As U.S. output continues to level off from 44-year highs last summer, producers in the Middle East have seized market share. Following the latest supply gains from OPEC, the influential International Energy Agency (IEA) reported that producers in the Middle East now control their largest share of the overall global energy market since the late 1970s.

Market participants will continue to eye production in the U.S. with the Baker Hughes’ data out later on Thursday.

According to oilfield services provider, the number of rigs drilling for oil in the U.S. increased by 10 last week to 351, marking the fifth increase in six weeks.

The renewed gain in U.S. drilling activity fueled speculation that domestic production could be on the verge of rebounding in the weeks ahead, underlining worries over a supply glut.

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