Oil futures ease, finding stability ahead of rig count data

London (Aug 5)  Oil futures eased on Friday, stabilizing above three-month lows following this week’s wide swings, as the market remained caught between large stockpiles and signs of rebalancing between supply and demand.

Brent crude LCOV6, -0.45%  , the global oil benchmark, fell 0.6% to $44.02 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures CLU6, -0.45% were trading down 0.5% at $41.72 a barrel.

The decline comes on the heels of a volatile week for the oil market. Prices entered a bear market — marked by a decline of 20% from a recent peak — earlier this week, with U.S. futures dipping to a three-month low below $40 a barrel. The market has since bounced, with prices close to where they were just a week ago.

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Eugen Weinberg, an analyst at Commerzbank, said he expects the market to consolidate above $40 in the near term, rising to around $50 on a sustainable basis by the end of the year.

“The continuing rebalancing of the market, with shrinking of oil supplies and strong demand,” will push up prices, Weinberg said.

Prices have rebounded since an unexpectedly large decline in U.S. gasoline inventories was reported in government data on Wednesday. The fall in stocks helped ease concerns that a mounting gasoline glut would swamp the oil market and send prices on a fresh retreat.

“Clearly there were some storage issues, some oversupply issues,” said Stuart Ive, private client manager at OM Financial in New Zealand. “Have they dissipated? Maybe to a degree, but there’s been no sign of the refineries backing down on production.”

Traders are monitoring U.S. rig count data, due later Friday. The count has been steadily increasing since oil briefly broke above $50 in June.

China figures

On Monday, traders will get fresh guidance on the health of oil-market demand, when the Chinese government releases data on crude-oil imports for July. Imports into China have been rising sharply this year, which analysts have attributed to a combination of low oil prices and high demand from independent refiners newly allowed to import oil.

In a report, research firm BMI said Chinese imports will likely taper in the months ahead, “due to a combination of factors including brimming commercial fuel stockpiles...and a more gradual pace of strategic stock building.”

In refined fuel markets, Nymex reformulated gasoline blendstock for September RBU6, -0.74%  — the benchmark gasoline contract — fell 0.7% to $1.36 a gallon. ICE gasoil changed hands at $381.00 a metric ton, up $7.75 from the previous settlement.

Source: Reuters