Oil rises back toward $55, outlook still fragile

Friday, 6 February 2015 00:00 - - {{hitsCtrl.values.hits}}

LONDON (Reuters): Oil rose toward $55 a barrel on Thursday, recovering from part of the previous session’s slide after China took steps to pour liquidity into the world’s second-biggest economy, although traders and analysts said oil’s outlook looked weak.

Crude snapped a four-day winning streak on Wednesday, when the US government said crude inventories increased by 6.3 million barrels, rising for a fourth consecutive week to hit a record high. The market gained support on Thursday from optimism that steps by China’s central bank to pour in fresh liquidity would spur demand for energy in the second-largest oil consumer after the United States. Brent crude rose 83 cents to $54.99 a barrel by 1016 GMT (05:16 a.m. EST), having fallen more than a dollar intra-day earlier and settling 5.5% lower on Wednesday. US crude added 60 cents to $49.05. “It will be some time yet before we see any sustained trend reversal in oil prices,” said Carsten Fritsch, analyst at Commerzbank. “There’s no basis for a sustained recovery at the moment.” The market remains highly volatile. Oil began to rise last week from near-six-year lows, in part due to a downturn in US rig activity that could eventually dampen rapid growth in shale oil production, only to tumble on Wednesday. Other participants said it was too soon to expect a sustained price rise.“I think prices will consolidate around these sorts of levels before moving lower,” said Christopher Bellew, a senior broker at Jefferies Bache. “It takes a lot of time for fewer rigs to translate into lower oil production.” A workers’ strike in the United States at nine plants, including seven refineries accounting for 10% of the country’s refining capacity, added to concerns over crude demand. The United Steelworkers union (USW) said a new contract offer was made by lead oil company negotiator Royal Dutch Shell Plc on Wednesday, and that it will respond after considering the offer on Thursday.