By Lisa Barrington
LONDON (Reuters) – Oil stabilized on Wednesday after China moved to support the country’s economy and stronger than expected U.S. durable goods data was released, but prices stayed near 6-1/2-year lows as a heavy supply glut kept market outlook bearish.
“Oil is catching its breath a bit and seeing if markets have been oversold or not,” Capital Economics commodities economist Thomas Pugh said.
U.S. durable goods orders rose 2 percent in July, going against a 0.4 percent contraction forecast by the Reuters analyst consensus, U.S. government data said on Wednesday.
Brent (LCOc1) was up 30 cents at $ 43.51 a barrel by 1300 GMT, and U.S. crude (CLc1) was up 10 cents at $ 39.41 a barrel.
Oil has lost a third of its value since June on high U.S. production, record crude pumping in the Middle East and concern about falling demand in Asian economies.
On Monday, both crude oil benchmarks saw their lowest trades since early 2009, dropping as much as 6 percent in one session after heavy falls in equity markets.
“The trend remains down, but in an erratic phase where attempts to recover are being made,” PVM Oil Associates director Robin Bieber said.
China has cut interest rates and lowered the reserves banks must hold and injected 140 billion yuan into banks through short-term liquidity operations to calm fears about a severe economic slowdown.
ANZ said China’s rate cuts had calmed commodity markets, but they remained cautious and gains would be limited as global oil oversupply is likely to persist in the short term.
Pugh at Capital Economics said he thought the oil market was “already pricing in a worst case scenario in China at the moment”, adding: “I’d be surprised if we drop much further.”
But physical oil traders say the physical market remains stubbornly weak, with the global crude oil glut proving difficult to clear.
In the United States, a fluid catalytic cracking unit (FCCU) is shut and another is running at lower rates at Phillips 66 (PSX.N) Wood River, Illinois 336,000 barrel-per-day refinery after a cooling tower associated with the gas plant collapsed on Tuesday.
U.S. crude stocks fell by 7.3 million barrels last week to 449.3 million as refinery runs increased, compared with analysts’ expectations for a rise of 1 million barrels, industry data from the American Petroleum Institute showed on Tuesday.
U.S. government oil stockpiles data are due later on Wednesday from the Energy Information Administration.
(Additional reporting by Meeyoung Cho in Seoul and Henning Gloystein in Singapore; Editing by Christopher Johnson and David Evans)
