Oil prices rose slightly Thursday ahead of the release of weekly U.S. supply data, despite concerns of an economic slowdown in China, Reuters reported. The news comes as oil production has fallen to a nearly one-year low in recent months and is likely to continue falling months longer than initially expected, the U.S. Energy Information Administration (EIA) said, according to the Wall Street Journal.
Crude prices fell more than 3 percent this week, as U.S. oil inventories rose by 2.1 million barrels – a sign of an oversupply of crude. Market participants were waiting for official data to be released Thursday by the EIA, generally seen to be more reliable. Analysts expected inventories to have increased last week by 1 million barrels.
Officials with the EIA said Wednesday that they expected oil – which fell to a one-year low in August – to continue its decline well into 2016, likely until next September. The concerns were seen to indicate that a year-old price decline is impacting the country’s oil industry, according to Market Watch.
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"The stage is set for a recovery but as long as we keep getting disappointing numbers out of China it will weigh and delay a recovery," said Hamza Khan, commodities analyst at ING Financial Markets in Netherlands, according to Reuters.
Oil prices have fallen steeply, over 50 percent, since June 2014, amid soaring output matched by slowing economies in Asia, the primary region of growth for commodities in recent years. The decline was compounded when the Saudi Arabia-led Organization of the Petroleum Exporting Countries decided last to keep output high to defend its market share last November, Reuters reported.
Supply is likely to remain high amid lower production costs.
"This is what 'lower for longer' really means: prices need to be lower in order to rebalance the market, especially with lower production costs making supply more resilient," Societe General, a multinational French banking and financial company, said in a note, according to Reuters.