Oil was swept along by volatility in Chinese markets, rallying from a 12-year low as the country sought to quell losses in its equities and stabilize its currency.
Futures rose as much as 3.2 percent in New York after China suspended a controversial equity circuit breaker system and its central bank set the yuan’s reference rate little changed after an eight-day stretch of weaker fixings. Crude slid Thursday to the lowest since December 2003 as market turbulence reverberated across the globe amid concern over economic growth in the world’s biggest energy consumer.
While the turmoil in China has contributed to oil’s slide this year, prices are also being weighed down by U.S. stockpiles that remain about 100 million barrels above the five-year average. Analysts from Nomura Holdings Inc. to UBS Group AG predict crude may fall to near $30 while the Organization of Petroleum Exporting Countries has effectively abandoned output limits amid a global glut to defend market share.
“The China story is dominating all markets at the moment, including oil,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “More volatility is likely. U.S. inventories remain elevated and that means they’re going to be a drag on the extent and timing of any price increases.”
West Texas Intermediate for February delivery rose as much as $1.07 to $34.34 a barrel on the New York Mercantile Exchange and was trading at $33.98 at 2:14 p.m. Hong Kong time. The contract slid 2.1 percent to $33.27 on Thursday, the lowest close since February 2004. Total volume traded was about 71 percent above the 100-day average. Prices are down 8.3 percent this week.
Brent for February settlement gained as much as 97 cents, or 2.9 percent, to $34.72 a barrel on the London-based ICE Futures Europe exchange. The contract lost 1.4 percent to $33.75 on Thursday, the lowest close since June 2004. The European benchmark crude traded at a premium of 52 cents to WTI.
More than $4 trillion has been erased from the value of global equities this year amid a renewed concern about China. The country abandoned a circuit-breaker system aimed at stymieing a stock rout after it was triggered by selloffs twice this week and baffled investors with a seemingly contradictory approach to the yuan, fueling greater anxiety over policy makers’ abilities to manage the slowing economy.
A potential initial public offering is under review for Saudi Arabian Oil Co., also known as Saudi Aramco, Mohammed bin Salman, the kingdom’s deputy crown prince, said in an interview with The Economist. The company controls 261 billions in oil reserves, more than 10 times the amount held by Exxon Mobil Corp., which has a market value of about $317 billion.