Oil prices rise on U.S.
stock draw but economic worries remain
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[July 07, 2016]
By Libby George
LONDON (Reuters) - Oil prices edged
higher on Thursday for a second day, supported by a report of
another fall in U.S. crude oil inventories and a weaker U.S. dollar,
although a glut of refined products and economic growth concerns
continued to loom over the market.
Brent crude oil futures were trading at $49.50 per barrel at 0857
GMT on Thursday, 70 cents above their last settlement. U.S. West
Texas Intermediate (WTI) crude was trading at $48.08 per barrel, up
65 cents from its last close.
Traders said that a report of a reduction in available U.S. crude
oil stockpiles was the main price driver, along with a slight
weakening in the U.S. dollar, which makes oil more affordable for
holders of other currencies.
The American Petroleum Institute (API) said its data showed U.S.
crude stockpiles fell by 6.7 million barrels last week, declining
for a seventh week in a row.
The data also was bullish for oil products, showing draws in both
diesel and gasoline.
"Oil demand growth remains robust," UBS said in a note, adding that
"an historically high level of physical inventories ... is no bar to
a rising price if the direction of travel in market adjustment is
The bank raised its price forecasts for 2016 and 2017.
However, traders warned that an economic slowdown and a glut in
supplies of refined products were weighing on oil markets.
Asian crude demand is slowing and by some measures falling, which
market participants said could be due to an economic slowdown and
perhaps even more permanent structural changes.
"Growth is slipping again ... and things don't seem quite so rosy,"
HSBC said in a note to clients.
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A pump jack stands idle in Dewitt County, Texas January 13, 2016.
Oil industry observers warned that fall-out from Britain's vote to leave the
European Union last month could weigh on oil prices if the market turmoil spread
"Yesterday's optimism both in the equities and oil markets could evaporate
quickly as the negative impact of Brexit will stay with us for the foreseeable
future," analysts PVM said in a note.
German industrial output plunged unexpectedly in May for its steepest monthly
drop since August 2014, data showed on Thursday, suggesting Europe's largest
economy lost steam in the second quarter after a surprisingly strong start to
On the supply side, Libyan officials said oil export terminals that have been
shut since 2014 could open again soon, potentially restoring 600,000 barrels per
day of crude export capacity.
(Additional reporting by Henning Gloystein in Singapore; Editing by Greg Mahlich)
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