North Sea benchmark Brent crude oil price rose 3% yesterday in line with the FTSE-100 index after China’s national bank cut interest rates.
Brent crude closed at $43.95-barrel – up from Monday’s $42.23-barrel, which was its lowest for six years.
Oil rose more than 3% as oversold conditions brought some buyers back to the market, but lingering supply glut and worries about the slowing economy in China kept crude prices near 6½ year lows.
Futures of U.S. crude and Brent, the global oil benchmark, are both down more than 16% on the month. About half of those losses were incurred in the past two sessions as plummeting Chinese equities sparked a selloff across global markets.
Several members of the Organisation of the Petroleum Exporting Countries are producing record volumes of oil in an attempt to squeeze out competition – primarily US shale gas.
Also adding to supply glut concerns, OPEC member Iran said today it would increase crude production and reclaim its lost export share after international sanctions are lifted, even if prices remain low.
Capital Economics commodities economist Thomas Pugh commented: “High OPEC output should help to prevent crude oil prices from rebounding sharply even as China fears recede and demand recovers”.
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Meanwhile, Norway’s national energy regulator said preliminary results from a North Sea field showed a potential increase in estimated recoverable oil reserves.
The National Petroleum Directorate said it was reviewing the preliminary results from an appraisal well drilled by Lundin Petroleum in the Edvard Grieg oil field in the central North Sea.
“Preliminary calculations show that the results from the well may result in an increase of between 6.2 million and 50 million barrels of recoverable oil in this section of the Edvard Grieg field,” the regulator said in a statement. “Further work is expected to reduce the uncertainty of this estimate.”
Edvard Grieg was discovered in 2007. The company says first production from the field is expected in late 2015. Peak production is anticipated at 90,000 barrels of oil and 53 million cubic feet of natural gas per day.
Lundin, which has headquarters in Sweden, made an oil discovery in a previously untapped area within the Luno II North prospect in the North Sea field last week. For Norway, the upward revision could support future growth in an economy that depends on oil as a source of revenue.
The Norwegian government said last week its economy, as measured by gross domestic product, was weakened because of the depressed oil market. Crude oil prices are trading below $50 per barrel, putting downward pressure on the economies of exporting nations.