Oil bounces back but still near 6½-year lows

LONDON: Oil bounced back from heavy losses yesterday but global oversupply and worries about the severity of the economic slowdown in China, the world’s top commodity consumer, kept prices near 6 -year lows.

European share markets recovered but Chinese stock markets closed down more than 7%, with panic selling intensifying after the Shanghai Composite Index crashed through key support at 3,000 points.

China cut interest rates yesterday and lowered the amount of reserves banks must hold in its move to stimulate growth, but oil prices barely moved in response.

US crude, also known at West Texas Intermediate or WTI, was up US$1.40 (RM5.90) at US$39.64 (RM166.88) a barrel by 1320 GMT, while Brent was up US$1.50 at US$44.19.

“In the past few days, we have seen a lot of the effects of the equity markets,” Petromatrix oil analyst Olivier Jakob said.

Oil prices dropped to their lowest since early 2009 on Monday and, despite yesterday’s slight uplift, many analysts think market fundamentals will keep them low.

“China’s economy continues to slow and the (US) Fed may still hike rates before the end of the year. That puts further cracks into the two main growth pillars for the world economy of recent years: Chinese demand (including commodities) and easy money,” HSBC’s co-head of Asian economics research Frederic Neumann said.

Daniel Ang at Singapore’s Phillip Futures said the rebound for oil could be temporary.

“Both WTI and Brent look like they are on their way to 2008 levels where prices hit a low of US$32.4 and US$36.2,” Ang said.