Crude oil on track for weekly gain despite glut

[October 30, 2015]  By Libby George

LONDON (Reuters) - Crude futures held steady around $49 in early Friday trading, poised to post the first weekly gain in three weeks despite a supply glut that has tested storage capacity and hammered company results.

The potential gain, driven by smaller-than-expected builds in U.S. oil stocks, was widely viewed as a temporary boost in a market that is awash with oil and staring down sluggish economic growth in key markets such as the United States and China.

Brent crude traded 10 cents higher at $48.90 a barrel at 0940 GMT, set for a nearly 2 percent weekly increase.

U.S. crude was down 10 cents at $45.96 a barrel, on track to post a gain of nearly 3 percent on the week.

"Looking at the bigger picture, there is still lots of oil in the United States," PVM Oil Associates analyst Tamas Varga said. "We should see a softer market in the coming days."

Traders said a rally earlier in the week sparked by a 3.4-million-barrel crude build reported by the U.S. Energy Information Administration provided the sole support for the weekly increase. [EIA/S]

The build fell short of some analysts' expectations and sparked a nearly $3 rally in U.S. crude.

But bearish data quickly followed, tempering the gains. U.S. economic growth braked sharply in the third quarter as businesses cut back on restocking warehouses to work off an inventory glut. Weak home sales soured the mood further.

China's Ministry of Commerce announced on Friday a doubling in the country's crude oil import quota for 2016, but concerns about shaky growth in the world's largest energy consumer lingered.

Trading is likely to be muted in advance of China's closely watched Purchasing Manager Indexes (PMIs) next week, analysts said.

"Clearly China demand is a key question for energy markets at the moment. With the manufacturing PMI due Monday I wouldn't expect anyone to get too carried away," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

Oil executives, smarting from a 50 percent slide in prices since last year, saw little relief. Oil companies reported a dramatic drop in third-quarter income, with some falling to a loss, and said the pressure could persist through 2016.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Dale Hudson)

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