Global supply glut sends oil prices sliding again

Crude prices sank after China cut interest rates again.
Crude prices sank after China cut interest rates again.AFP

NEW YORK (AFP) - Oil prices stretched losses into a second week on Friday amid little sign of an end to the generous crude supply situation.

In New York trade, West Texas Intermediate crude for December delivery finished at US$44.60 a barrel, down 78 cents for the day and US$2.02 off the previous Friday's close.

In London, Brent crude for December lost nine cents at US$47.99 a barrel, after falling as low as US$47.45. A week ago Brent closed at US$49.93 per barrel.

Crude prices on both markets sank after China cut interest rates again in what some took as a signal of more worries over growth in the world's second-largest economy.

"It was a schizophrenic day for commodities," noted CMC Markets analyst Jasper Lawler.

"There was an initial rally on the prospect of improved demand in China after the People's Bank of China cut interest rates.

"This was followed by a swift reversal lower on the realisation that the previous five rate cuts had not worked - and that actually the policy move just serves to prove China's economy is in trouble."

"Worries about the health of the Chinese economy continue to batter commodities prices," echoed Sanjeev Gupta, who heads the Asia-Pacific oil and gas practice at professional services firm EY.

Fawad Razaqzada at trading firm Gain Capital said the overall picture this week has been of a well-supplied market that will likely only be more glutted when Iranian crude exports surge after the western embargo on the country is lifted.

Prices were hammered Wednesday after the US Department of Energy said the country's commercial oil inventories jumped eight million barrels to 476.6 million in the week to Oct 16.

And the Baker Hughes North American rig count released Friday showed only a minor dip in US drilling as production remains high.

"At times this week, it looked like the buyers were back in the game as oil prices managed decent intra-day bounces," Razaqzada said.

"However, those proved to be merely short-covering rallies and the sellers grew in confidence after the US commercial oil inventories rose surprisingly sharply for a second straight week," he told AFP.

That reminded hopeful bullish speculators "that the excessive supply of the stuff is still a big factor weighing on sentiment," he said.

In addition, he said, "The firmer dollar has weighed on the buck-denominated black gold."