Picture: SUNDAY TIMES
Picture: SUNDAY TIMES

LONDON — Oil prices eased to near 11.5-year lows on Friday, erasing earlier gains, pressured by persistent global oversupply and a bleak demand outlook.

Prices were up in early trading after Beijing deactivated a circuit breaker mechanism that was blamed for aggravating equity market crashes earlier this week.

Oil prices plunged to 12-year lows on Thursday after China allowed its yuan currency to slip, sending stock markets tumbling globally. Beijing then suspended equities trading as the sharp falls triggered the circuit-breaking mechanism for a second time since its introduction this week.

Brent fell by 16 cents to $33.57 a barrel by 1501 GMT, near a low of $33.26 reached in June 2004. US West Texas Intermediate (WTI) was down 22 cents at $33.06 a barrel.

A stronger dollar following data on Friday the US economy created a greater-than-expected 292,000 nonfarm jobs in December weighed on prices.

Barclays expects Chinese oil demand to grow by 300,000 barrels per day (bpd) in 2016, down from an estimated 510,000 bpd last year. But the bank expects crude imports into China to be boosted by inventory build-up and higher quotas for teapot refineries to import crude.

ABN Amro on Friday cut its 2016 Brent and WTI price forecast to $50 per barrel from its prior view of $65 and $60, respectively.

Over the past year, the world has been producing 1.5m barrels per day more oil than it consumes. OPEC and the International Energy Agency expect global demand growth to slow in 2016 to around 1.20m-1.25m barrels per day from a very high 1.8m bpd in 2015.

Average US oil rigs fell by 46 in December to 714 compared with November, Baker Hughes INC said on Friday. The worldwide rig count for December fell by 78 to 1,969.

The US Energy Information Administration said last month that production in 2016 would fall by 570,000 barrels per day (bpd) to 8.76m bpd, an upward revision from its 520,000 bpd forecast in November.

The options market is showing there are concerns oil prices can fall further. Some investors are protecting themselves by acquiring put options giving them the right to sell at $25 a barrel, anticipating that Brent will fall below that, and the costs of those options are soaring.

Reuters