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Oil Markets
Oil Prices Rally on China Data
From the Wall Street Journal of Tue, 23 Dec 2014 05:59:57 EST

Crude oil prices edged slightly higher on Tuesday amid some signs of stronger demand from China, one of the world’s largest consumers of oil.

Adding up apparent demand figures for the main refined products, China showed a year-on-year increase in consumption of 717,000 barrels of crude oil a day, according to analysts at JBC Energy.

“Apparent oil demand in China has continued its run higher over the course of November,” they said.

That is good news for oil producers, which have been hammered by the near 50% decline in oil prices since June. Signs that demand is starting to pick up in response to the drop in prices could help absorb some of the ample supplies of crude oil in global markets.

Brent crude for February delivery was up 0.8% at $60.59 a barrel on London’s ICE Futures exchange, having dipped as low as $59.84 earlier in morning trade. Front-month WTI futures were up 1.1% to $55.90 a barrel on The New York Mercantile Exchange.

With oil prices down in the doldrums, analysts at Standard Chartered Bank said in a research note that U.S. shale-oil activity has already taken “a downward lurch.” The trend will continue throughout the first quarter of 2015, “unless there is an unexpectedly early move up in oil prices,” the analysts said.

By the end of the first quarter, the U.S. will be losing more production from old oil wells than it is gaining in production from new wells, “and net growth would likely become negative,” they said.

Standard Chartered said it sees the oil market overcoming the current oversupply in the first half of 2015. Saudi Arabia—and by implication the Organization for the Petroleum Exporting Countries -- “is aiming for a short sharp shock to other producers rather a long slow war of attrition,” the analysts wrote.

Still, “should demand sag or non-OPEC supply show any resilience at current prices, we would expect Saudi Arabia to roll its low-price policy into the second half,” they said.

Write to Matthew Cowley at matthew.cowley@wsj.com



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