Wednesday, 9 December 2015

Oil prices rise as Japan machinery orders bounce

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Crude prices rose on Wednesday as Japan posted stronger than expected machinery orders and China announced an easing of some import taxes, lending the market at least temporary support in an environment of general oversupply.

U.S. crude futures were at $38.08 per barrel at 0209 GMT, up 57 cents from their last settlement. Internationally traded Brent futures were up around half a dollar at $40.74 a barrel.

Traders said the recovery on Wednesday was largely a result of short covering, a surprise lift in Japanese machinery orders and Chinese tax reforms aimed at encouraging imports of advanced equipment, energy raw materials, and key assembly components.

Yet analysts said there remained a plethora of bearish factors that have helped pull down commodity prices since 2014, including the strong dollar, weakening global demand, soaring supplies and the unwinding of a quantitative easing (QE) premium with the U.S. Federal Reserve expected to hike rates soon.

"Whatever the case, a CRB index hovering around 13-year lows and oil prices close to seven-year troughs suggest that commodity producers in general are doing it tough," ANZ bank said, referring to the Thomson Reuters Core Commodity CRB Index falling below 178 points for the first time since 2003.

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