Oil futures registered a decent recovery on Wednesday, ending a string of losses since the beginning of the year. The rise followed China’s favorable trade data for December that lifted investor sentiments in global markets. U.S. crude rose above the closely watched $30 per barrel price, beyond $31 in early trading.
U.S. West Texas Intermediate Crude now sits at $31.20 a barrel. That is already a far cry from Tuesday’s price. Crude had earlier reached a low of $29.93, marking a 12-year low.
Brent crude also gained on Wednesday, adding $0.72 to hit $31.58 a barrel. The benchmark touched a $30.34 low on Tuesday, but finished the day slightly higher.
China numbers lift hope
The bounce in crude markets followed recent positive trade data from China, the world’s second-largest consumer of oil. Official data showed that China’s crude imports were up to a record 7.82 barrels in the month of December 2015, indicating a 21% jump in oil imports from the previous month. It seems China is taking the opportunity to accumulate crude while prices are low.
China’s strong oil import numbers served to lift investor hope that the widely publicized economic slowdown in China was not as painful as it appears.
Weakness to persist
Despite gains in crude, price pressure in oil market is expected to persist. The U.S. government predicts global oil production will continue to outpace demand, thus keeping crude prices low through 2016. The oil glut over the coming years is expected to be driven by the boom in U.S. shale oil despite a coming wave of bankruptcies, and a refusal by OPEC to cut production. The coming of Iranian oil to the global market is also expected to add to the oversupply situation, thus driving prices down.
Tensions between Saudi Arabia and Iran over Yemen could reverse the trend though, if current ill will translates to over hostilities between the two oil producers.