Oil prices steady around multi-year lows

[January 08, 2016]  By Meeyoung Cho and Ahmad Ghaddar

SEOUL/LONDON (Reuters) - Oil prices steadied around 11-1/2-year lows, after rising earlier during the day following Chinese shares higher, as persistent global oversupply and a bleak demand outlook weighed on prices.

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 leading energy consumer 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.

"We haven’t really seen a change in the trend, and much more evidence is needed for calling a trend change or even a halt in prices," Michael Poulsen of Global Risk Management said.

"It looks like it’s some technical trading, but you could put the China sticker on it," Poulsen added.

Brent rose 9 cents to $33.84 a barrel by 1114 GMT, near a low of $34.18 reached in July 2004. U.S. West Texas Intermediate (WTI) was flat at $33.27 a barrel.

Chinese stocks rose on Friday as the yuan currency firmed in early trade after the People's Bank of China strengthened its official rate for the first time in nine trading days.

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

Average U.S. 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 U.S. Energy Information Administration said last month that production in 2016 would fall by 570,000 barrels per day (bpd) to 8.76 million 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.

Oil bull Andy Hall's Astenbeck Capital Management lost about 35 percent in 2015, CNBC reported on Thursday, citing a source who reviewed the fund's performance.

OPEC's smallest member Ecuador, which has increased debt and reduced investments due to the oil price plunge, said it would continue to press for production cuts when the cartel meets next on June 2 in Vienna.

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